46 min read
Alabama 2023 Sales Tax Guide
Alabama Sales Tax in a Word Alabama, the Heart of Dixie, is the 22nd state in the union and undeniably a place of many great American inventions and...
Running a business in Arizona takes focus, commitment, and an ability to keep cool.😎
And, of course, a good dose of inevitable regulatory compliance.
This comprehensive guide will set anyone with an Arizona business on the path to meeting their legal requirements around “Sales Tax,” or its funky Arizona cousin, Transaction Privilege Tax. Grab a frosty beverage and get ready for tax help that aims to be hopefully less dry than the Sonoran Desert.
After reading this guide, you will know:
How to contact the Arizona Department of Revenue
When to charge use tax vs paying Transaction Privilege Tax in Arizona
What goods and products are taxable in Arizona
When you establish a sales tax nexus with the state of Arizona
How to register for a sales tax license (aka Transaction Privilege Tax License) in Arizona
How to collect tax in Arizona
How to file and pay sales tax in Arizona
Our Arizona Sales Tax Guide will give you the confidence to manage your AZ sales tax questions from beginning to end. If you have any other questions to help you determine your tax sales obligations in Arizona and how to fulfill them, we are here for you.
✔️ Do you need to contact the Arizona Department of Revenue ?
✔️Are you unsure if you should call, email, mail, or visit in person?
✔️ Do you ever wondered what information to have ready before contacting them?
Well, you're in luck!
Here's how to get in touch with the Arizona Department of Revenue.
Visit: Arizona DOR has three offices that you can visit IRL, but you must email AZTaxHelp@azdor.gov first.
Phoenix Office: 1600 W. Monroe Phoenix, AZ 85007
Mesa Office: 55 N. Center Mesa, AZ 85201
Tucson Office: 400 W. Congress Tucson, AZ 85701
If you wish to have someone call on behalf of the owners or principles, whomever is calling must have an Arizona Power of Attorney (PDF) active before calling or else they will be wasting their time. Representatives at ADOR will not be authorized to talk to someone unless they have a Power of Attorney established. Learn how to complete an Arizona Form 385 - Power of Attorney Form - here.
Well... it's complicated especially since, like many other states, Arizona has enacted laws in response to the South Dakota vs Wayfair case. Read on, so you can learn if you and your business are affected.
Effective October 1, 2019, remote sellers and marketplace facilitators are required to file and pay transaction privilege tax (TPT) in Arizona as a result of House Bill (H.B.) 2757 signed into law by Arizona Governor Doug Ducey on May 31, 2019. This legislation follows the U.S. Supreme Court's 2018 ruling in the South Dakota v. Wayfair case, allowing states to enforce tax collection on sales from out-of-state businesses without a physical presence. This law is not retroactive, but if you sell in Arizona you will need to pay attention to the thresholds that the State of Arizona has set.
H.B. 2757 establishes an economic nexus standard based on dollar thresholds for businesses without a physical presence in the state.
Economic nexus is triggered if either of the following thresholds were met in the previous calendar year or are projected to be met in the current year:
Year |
2019 |
2020 |
2021 and beyond |
Gross sales threshold |
$200,000 |
$150,000 |
$100,000 |
Measurement Date |
Previous or current calendar year |
Previous or current calendar year |
Previous or current calendar year |
Establishing physical nexus, or a physical presence, in Arizona is an important consideration for businesses regarding their tax obligations. The following factors indicate the likelihood of physical nexus:
Assets or Property in Arizona: If your business has control over assets or property stored in Arizona, indicating the ability to determine their location and storage conditions, it is likely that physical nexus exists.
Conducting Taxable Business Activity in Arizona: When your business engages in taxable business activities in Arizona, irrespective of the duration, physical nexus is typically established.
Ongoing Business-Related Activities in Arizona: If your business regularly conducts other ongoing business-related activities in Arizona, physical nexus is likely present. These activities contribute to establishing and maintaining a market presence in the state, supporting sales and customer relations.
Activities and factors that, individually or in combination, contribute to establishing physical presence in Arizona include:
Maintaining an office or another business location within Arizona, regardless of the specific function performed at that location.
Owning or leasing real estate or personal property in Arizona.
Storing inventory in Arizona under the retailer's direction and control.
Regularly delivering merchandise or goods into Arizona using vehicles owned or leased by the retailer.
Undertaking local activities within Arizona by employees, agents, representatives, contractors, or affiliated persons that contribute to name recognition, market share, sales volume, goodwill, and customer relations. These activities should be ongoing and not transitory, such as soliciting sales through local marketing contracts, providing ongoing delivery, installation, or repair services through contracts, or offering training or support services to customers, employees, or representatives on a consistent basis.
Retailers meeting the criteria for physical presence described above are considered liable for transaction privilege tax as taxpayers located within Arizona.
If you are temporarily storing property with a third-party fulfillment center and have no control over the storage facility, it is unlikely that this arrangement constitutes physical nexus. In such cases, where you lack control over the storage location, the level of physical nexus is typically not met.
No, transitory (short-term) business activities conducted within Arizona generally do not establish physical nexus. It is important to note that activities are not considered transitory if they generate gross receipts, are ongoing, and regularly conducted within Arizona.
Similarly, if a retailer conducts the same business outside of Arizona and generates gross receipts from activities performed in the state, those activities are not considered transitory either. Understanding the distinction between transitory and non-transitory activities is crucial in determining the presence of physical nexus for tax purposes.
If you have a salesperson who is a resident of another state but regularly travels to Arizona to sell your products or provide support for previously sold products, it is highly likely that your business establishes physical nexus in Arizona. Since your sales activities are ongoing and conducted within the state, it indicates a significant connection with Arizona.
As a result, you are generally required to pay transaction privilege tax (TPT) on all sales made into Arizona, considering your business as a retailer located within the state. Adhering to these tax obligations ensures compliance with Arizona's tax regulations.
The presence of an employee living in Arizona and working remotely from a home office, specifically engaged in non-sales related activities such as accounting functions or other administrative tasks (e.g., bookkeeping, clerical work), typically does not establish physical nexus. These activities are not directly related to establishing or maintaining a market presence in Arizona.
However, it's important to note that if your company meets the economic nexus thresholds outlined by Arizona, you may still be required to report transaction privilege tax (TPT) on sales made to Arizona customers. Economic nexus criteria, based on sales volume or other factors, determine your tax obligations regardless of physical presence.
If you bring inventory to sell at a trade show in Arizona, the presence of physical nexus depends on various factors. Consider the following:
Sales Activity: If you make sales at the trade show and regularly engage in similar sales outside of Arizona, your activity is not considered transitory. In such cases, you will require a seasonal Transaction Privilege Tax (TPT) license. Additionally, you must pay TPT on all sales made at the trade show.
Duration of Physical Nexus: Your physical nexus will cease once you leave the state after the trade show. At that point, you may choose to cancel your TPT license after reporting all sales from Arizona customers for the month during which you were present at the trade show.
Post-Trade Show Sales: If you continue to sell to Arizona customers from your home state after the trade show, and you meet the threshold requirements for economic nexus, you should contact the ECCO team to update your license accordingly. It's important to note that the sales made at the Arizona trade show do not count towards meeting the economic nexus threshold.
A marketplace seller refers to an individual or business that exclusively sells their products or services through one or more online marketplaces operated by marketplace facilitators, like Amazon or eBay. Unlike traditional sellers who operate their own websites or physical storefronts, marketplace sellers rely solely on these platforms to connect with customers and facilitate their sales transactions. By leveraging the reach and infrastructure of marketplace facilitators, these sellers can expand their market presence and reach a broader audience of potential buyers.
In general, as a marketplace seller, you are not individually required to register for a sales tax license or file tax returns if you exclusively sell through a marketplace facilitator. Instead, it is the responsibility of the marketplace facilitator to handle the necessary registration, tax collection, and filing on your behalf. The marketplace facilitator should provide you with documentation confirming their role in collecting and remitting sales tax.
Arizona transaction privilege tax (TPT) due on these sales are reported and remitted by that marketplace facilitator.
An affiliated party refers to a person or company that holds more than a 5% ownership in the other party or is considered related due to a third person or company (or group) having an ownership interest exceeding 5%.
While economic nexus can be established by combining the income of affiliated parties, it is important to know that once nexus is established, each affiliated party must obtain a license and may choose to report their taxes individually or on a consolidated basis. However, filing consolidated returns is not mandatory for affiliated parties.
Arizona does not currently have click through nexus laws on the books.
The first thing to say about Sales Tax in Arizona is the most surprising and confusing: that there is no such thing! Say whaaat? Ok, article over, thanks for coming everybody…. :) If only!
There is, of course, a tax liability for conducting business in Arizona, it’s just not transaction-based and it is levied against the vendor for the privilege of doing business. Are you a business with a physical presence or selling tangible items in the state of Arizona? If so, you likely need to register for a Transaction Privilege Tax (TPT) License.
There are four ways to register for an Arizona Transaction Privilege (TPT) License in Arizona.
Before you sign up for Arizona TPT License, you want to have the following information easily accessible:
At minimum, the cost to set up a sales tax license in Arizona is $12. You may also need to pay city and county fee, depending on the location of your business.
Here is the current fee schedule:
Absolutely, unless you are registering as a sole proprietor in which case you may opt to use your Social Security Number.
You can easily register for a Federal EIN here.
I promise that it will be the least stressful encounter with the IRS; it is quick and easy to apply for an EIN number.
Depending on your business type, it may be necessary to comply with other regulatory bodies such as:
This will require some investigation on your end. Since every business is unique, there are different rules, regulations, and laws may apply.
We suggest contacting to the Arizona Department of Revenue’s License Compliance Program at their email to verify which additional government agencies you will be required to register with.
If you are a business who has established a nexus with Arizona, you are required to collect sales tax in Arizona. Knowing this is just half the battle. Now, We are going to help you navigate the process of how to go about that.
In fact, We are going to review some common questions our clients have ask regarding their Arizona sales tax obligations.
After reading this, you will be better equipped to collect sales taxes.
Arizona is origin-based tax state. As such, you need to charge sales taxes based on where the seller is located. If Arizona was a destination-based sales tax state, you would charge based on where your buyer is located.
Now that you know how origin and destination-based sales tax states are different, you will appreciate why you need to know these two things:
Based on the location of the seller, you want to make sure you correctly charge sales taxes in your point of sale or eCommerce software. Otherwise, you risk under or over collecting.
Remember when we said that Arizona is a Destination-Based and a Transaction Privilege Tax State? This means your business pays for the privilege of conducting business in Arizona, based on the revenue received. No need to collect taxes based on transactions; purely the location of the purchase. Your eCommerce software should be able to calculate this for you on the fly.
Rather that listing a zillion sales tax rates, I recommend that you use the Arizona Sales Tax Look Up Tool that can be found here.
In the state of Arizona, various goods, services, and transactions are generally subject to sales tax. Here are some common taxable items and activities in Arizona:
Tangible personal property: Most sales of tangible personal property, such as clothing, electronics, furniture, appliances, and vehicles, are subject to sales tax in Arizona.
Prepared food and beverages: Sales of prepared food and beverages, including meals at restaurants, fast food establishments, and food sold at concession stands, are generally taxable in Arizona.
Lodging and accommodations: Charges for hotel rooms, vacation rentals, and other lodging accommodations are subject to sales tax in Arizona.
Retail services: Certain retail services, such as pet grooming, car washes, and dry cleaning, are subject to sales tax in Arizona.
Amusements and entertainment: Admission charges to events, concerts, movies, amusement parks, and recreational activities are generally taxable in Arizona.
Telecommunications services: Charges for telecommunications services, including telephone, internet, cable TV, and satellite TV services, are subject to sales tax in Arizona.
Motor vehicle rentals: Rental charges for motor vehicles, including cars, trucks, and motorcycles, are generally taxable in Arizona.
Digital products: Sales of digital products, including e-books, digital music, downloadable software, and streaming services, are subject to sales tax in Arizona.
It is important to note that there may be specific exemptions, exceptions, or additional taxes applicable to certain goods, services, or transactions. The Arizona Department of Revenue or a tax professional can provide more detailed information and guidance regarding specific taxable items and activities in Arizona.
Yes.
According to the Arizona Department of Revenue, computers, computer equipment, hardware, and software are all subject to transaction privilege tax (TPT) in Arizona. When these items are sold or leased, they are considered tangible personal property and fall under the retail or personal property rental classification for tax purposes.
If you are selling or leasing computers, computer equipment, hardware, or pre-written software, you will be required to pay TPT. This includes the sale of "canned" or pre-written software, which is considered tangible personal property and subject to tax. However, the charges for the installation of canned software may be exempt from tax if separately stated on the invoice and in the records.
On the other hand, if you are selling custom software designed exclusively for a specific customer's unique application, it is considered a professional service and not subject to tax.
Maintenance agreements and warranty contracts sold with computer hardware and software may be exempt from TPT if the price of the contract is separately stated on the invoice and in the records. However, software maintenance agreements that provide canned updates or revisions are subject to tax as the sale of tangible personal property.
Certain computer services, such as consulting, training, software installation, and technical phone support, are exempt from TPT as professional services. It is important to separately state charges for exempt services from the sale of tangible personal property on invoices and in records. Failure to separate the charges may make the entire transaction taxable.
In Arizona, certain items and transactions are exempt from sales tax. Here are some common exemptions from sales tax in Arizona:
In Arizona, various entities may be eligible for sales tax exemptions based on certain criteria. Here are some examples of entities that may qualify for sales tax exemptions in Arizona:
Each exemption category may have specific requirements, limitations, or documentation that needs to be provided to claim the exemption. Eligible entities should review the guidelines provided by the Arizona Department of Revenue or consult a tax professional to determine their eligibility and ensure compliance with the sales tax exemption provisions.
If you have a customer who is exempt from sales tax in Arizona, there are certain steps you can follow to ensure compliance and document the exemption appropriately. Here's what you should do:
Consult with a tax professional or the Arizona Department of Revenue for specific guidance and to ensure compliance with the sales tax exemption process in Arizona.
If you lose an Arizona sales tax exemption certificate, it is important to take the necessary steps to obtain a replacement certificate. Here's what you should do:
It is crucial to maintain accurate records and promptly address any lost or missing exemption certificates to avoid potential issues during sales tax audits or compliance checks.
It is time to talk about filing and paying your sales taxes in Arizona. In this section, We are going to cover the following frequently asked questions from our clients:
By the time you finish reading this, you will feel confident enough to file and pay your Arizona sales tax.
The filing frequency for Transaction Privilege Tax (TPT) in Arizona is based on the total estimated annual combined TPT liability of a business.
Sales tax filing frequency is based on estimated annual combined tax liability:
More than $8,000 estimated annual combined tax liability.
$2,000 - $8,000 estimated annual combined tax liability
Less than $2,000 estimated annual combined tax liability
Businesses with a duration of 8 months or less, such as those operating during specific seasons or limited periods, may file TPT returns on a seasonal basis.
If a business wants to change its filing frequency, they can download the Business Account Update Form, complete it, and mail it to the designated address mentioned on the form.
These filing frequency categories help businesses determine how often they need to submit TPT returns and remit the taxes owed to the Arizona Department of Revenue. It is important for businesses to accurately assess their estimated annual combined tax liability to ensure compliance with the appropriate filing frequency.
You must file and pay your sales tax no later than the 20th day of the month following the period being reported. For example, you will need to pay December sales tax by January 20th to avoid penalties and interest. You can download a printable filing schedule here.
The deadline is moved to the next business day, typically the Monday following the weekend or the day after the holiday. However, we always suggest filing before the holiday.
Let me ask you a question before I answer this one.
Are you a business who prepares your own tax returns, uses the computer to do so, and has internet access?
If the answer is “Yes, Yes, Yes”, Arizona offers an easy way to file online. Simply head to ADOR’s AZTaxes site and file the TPT-2 form online through the portal.
If you get stuck and need a hand, AZ Department of Revenue created this handy guide (PDF) to get through the online filing process.
You can also watch this video that walks you through how to file a sales tax return, one step at a time.
Paper submittal is also permitted, if you’re into that sort of thing. You can download form TPT2, fill out, enclose payment, and mail to:
Arizona Department of Revenue
PO Box 29010
Phoenix AZ 85038-9010
To correct an Arizona sales tax return, follow these steps:
If the error requires significant changes or adjustments, or if it involves multiple reporting periods, you may need to consult with the Arizona Department of Revenue or a tax professional for guidance on the specific correction process. They can provide assistance and ensure compliance with the applicable regulations.
Businesses with an annual transaction privilege tax and use tax liability of $500 or more during the prior calendar year are required to file and pay electronically.
Failure to comply with the electronic filing and payment requirements may result in penalties.
Penalty for not filing and paying electronically:
The Arizona Department of Revenue is pleased to update transaction privilege tax (TPT) taxpayers who e-file using the department’s electronic filing programs.
Taxpayers who file electronically during a calendar year are now able to claim an increased accounting credit from 1 percent to 1.2 percent; this increases the total calendar year credit limit from $10,000 to $12,000.
TPT taxpayers who have already e-filed can file an amended return to claim the increased accounting credit.
The increased accounting credit for electronic TPT filers is in accordance with the Arizona Department of Revenue’s commitment to expanding electronic filing of individual, corporate and TPT as e-filing is a more secure and efficient process.
For taxpayers who file paper TPT returns, the accounting credit remains unchanged at 1 percent and a total calendar year credit of $10,000.
TPT filers can confirm the electronic or paper accounting credit rate for each TPT business code by going to the following rate table.
If you are a current client, contact us immediately.
If not, follow these steps...
Review the notice: Carefully read through the audit notice to understand the scope, period, and purpose of the audit. Take note of the requested documentation, specific areas of focus, and the deadline for responding.
Gather documentation: Collect all relevant records and documentation related to your sales tax activities for the audit period. This includes sales invoices, purchase records, exemption certificates, financial statements, and any other supporting documents that may be requested.
Conduct an internal review: Perform an internal review of your sales tax practices and procedures to identify any potential areas of concern or non-compliance. This will help you better understand the issues that may arise during the audit and allow you to proactively address them.
Consult with a tax professional: Consider seeking guidance from a tax professional experienced in sales tax audits. They can provide valuable advice, help you navigate the audit process, and ensure that you are properly prepared.
Respond promptly: Adhere to the deadline provided in the audit notice and respond promptly. If you require additional time to gather the requested documentation, communicate with the auditor to request an extension if possible.
Cooperate with the auditor: Be cooperative and responsive during the audit process. Provide the requested documents and information accurately and in a timely manner. Maintain open lines of communication with the auditor and address any questions or concerns they may have.
Address any issues: If the auditor identifies any discrepancies or areas of non-compliance, work with them to understand the findings and propose appropriate resolutions. Cooperate in correcting any errors or adjusting your tax liabilities as necessary.
Maintain records: Keep copies of all communication, documentation, and audit-related records for your own records. This will help ensure a clear audit trail and facilitate future compliance.
Appeal if necessary: If you disagree with the audit findings or believe there are errors in the assessment, you may have the right to appeal. Consult with a tax professional to understand the appeal process and requirements.
Remember, it's important to remain proactive, transparent, and cooperative throughout the audit process. By being prepared, responsive, and seeking professional advice when needed, you can navigate the audit successfully and address any potential compliance issues effectively.
Arizona is a destination-based sales tax state. In destination-based sales tax states, the sales tax rate and rules are based on the location where the buyer receives the goods or services. This means that the sales tax rate and regulations are determined by the destination address where the product is delivered or the service is provided, rather than the location of the seller. As a seller, you are responsible for charging and collecting sales tax based on the specific destination within Arizona where the customer receives the taxable goods or services. It's important to correctly determine the applicable sales tax rate based on the destination address and comply with the reporting and remittance requirements set by the Arizona Department of Revenue.
Arizona is not a Streamlined Member State.
This blog is for informational purposes only and the information is accurate as of 2023-05-29 If you want legal advice on sales tax law for your business, please contact a Sales Tax professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog possibly may be out of date by the time you review it.
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