Arizona Sales Tax Rates

Total Range for 2024

5.6% – 11.2%

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Why do you need to collect sales tax in Arizona?

If you’re selling goods and services in Arizona then sales tax (or transaction privilege tax) might apply! To determine your obligation, you need to understand “nexus,” which ties businesses to states for tax purposes.

Two types of nexus exist:

  1. Physical Nexus: Having a physical presence, like an office, warehouse, or employees in Arizona, triggers this type. If you do, you likely need to collect sales tax.
  2. Economic Nexus: This kicks in when your sales within Arizona exceed a certain economic threshold. Even without a physical presence, surpassing this threshold requires collecting sales tax.

Is what you’re selling taxable in Arizona?

In Arizona, the term “sales tax” and “transaction privilege tax (TPT)” are often used interchangeably. So you may notice that we use both throughout.

Now that you’ve grasped the basics of Arizona’s sales tax and nexus thresholds, let’s delve into whether your specific products or services are taxable.

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How to register for sales tax in Arizona

Arizona requires businesses selling taxable goods or services to register for a transaction privilege tax (TPT) license, which essentially functions as your sales tax license.

Multiple Registration Options:

There are a few ways to register for a TPT license:

  1. Arizona Business One Stop (ABOS): This is the recommended online portal for most businesses. It provides a user-friendly platform to register, file returns, and make tax payments. You can access ABOS at https://businessonestop.az.gov/.
  2. Joint Tax Application (JT-1): You can download and complete a paper form (JT-1) and mail it to the Arizona Department of Revenue (ADOR).  This method might be preferable if you’re also registering for other state taxes simultaneously using the same form.  The JT-1 form can be found on the ADOR website: https://azdor.gov/
  3. In-Person Registration:  While less common, you can visit an ADOR office in person to submit your completed JT-1 application.

Information Needed:

Regardless of the chosen registration method, you’ll typically need to provide the following information:

  • Business name and legal structure (e.g., sole proprietorship, LLC)
  • Federal Employer Identification Number (FEIN)
  • Business address
  • Contact information
  • Type of business activity
  • Information about any locations where you’ll conduct taxable sales (if applicable)

Additional Steps:

  • Once you register, you might need to apply for a TPT license account number for each physical location where you conduct taxable sales.
  • ADOR will typically mail your TPT license after processing your registration.

How to collect sales tax in Arizona

In Arizona, collecting sales tax involves these key steps:

  1. Charge the Correct Rate:
    • The combined sales tax rate you need to collect will depend on the specific location where the sale is made.
  2. Separate the Tax Amount:
    • It’s a good practice to separately itemize the sales tax amount on your receipts or invoices. This transparency helps customers understand the breakdown of the total cost.
  3. Collect the Tax:
    • You’re responsible for collecting the sales tax from your customers at the point of sale.
  4. Record the Transaction:
    • Maintain accurate records of your sales and the sales tax you collect.
    • These records are crucial for filing your sales tax return with the Arizona Department of Revenue.

Example:

Phoenix clothing store, jacket costs $59.99 (pre-tax). Let’s assume Phoenix has an 8.1% combined sales tax rate. Here’s the calculation: 

  • Sales tax = $59.99 x 8.1% = $4.88 (rounded to two decimals)
  • Total Price: $59.99 + $4.88 = $64.87

FAQs

Do you have a physical nexus in Arizona?

In Arizona, determining whether you have a physical nexus, which essentially means a sufficient connection to the state for them to impose sales tax collection requirements, hinges on your business activities within the state. Here’s a breakdown of what might establish a physical nexus in Arizona:

Physical Presence:

  • Office or Place of Business: Having an office, store, warehouse, or any physical location in Arizona for conducting business activities establishes a nexus.
  • Employees or Representatives: If you have employees, salespeople, or other representatives (independent contractors might also count) who are physically present in Arizona for more than two days a year to conduct business on your behalf, that could create a nexus.
Do you have an economic nexus in Arizona?

Arizona uses a graduated economic nexus threshold based on your total annual sales into the state.  In simpler terms, you only need to worry about economic nexus if your sales surpass a $100,000 within a year.

What is use tax in Arizona?

In Arizona, use tax applies to tangible personal property that you purchase for storage or use in the state, but on which you didn’t pay sales tax at the time of purchase. The use tax rate in Arizona is the same as the state transaction privilege tax (TPT) rate, which is currently 5.6%.

Do you need a seller/reseller permit?

In Arizona, a seller’s permit (also known as a transaction privilege tax or TPT license) functions as the essential permit for businesses selling taxable goods or services. It essentially combines the functionalities of a seller’s permit and a resale certificate.

Here’s a breakdown:

  • TPT License Does It All:  You don’t need a separate seller’s permit and resale certificate in Arizona. The TPT license covers both selling taxable goods and purchasing goods for resale tax-free.
  • Who Needs a TPT License: Most businesses selling taxable goods or services in Arizona need a TPT license.
How to get a sales tax permit/license in Arizona?

In Arizona, a sales tax permit goes by the name of a transaction privilege tax (TPT) license. It essentially combines the functions of a seller’s permit and a resale certificate. Here’s how to obtain a TPT license:

Registration Methods:

There are three ways to register for a TPT license in Arizona:

  1. Arizona Business One Stop (ABOS)
  2. Joint Tax Application (JT-1)
  3. In-Person Registration
When are Arizona’s Returns Due?

Here’s a breakdown of Arizona TPT return due dates:

Filing Frequency:

  • Monthly:  If you expect to owe more than $7,500 in TPT liability per quarter, you’ll likely be assigned a monthly filing frequency.  The return for each month is due by the last business day of the following month.
  • Quarterly:  If your anticipated TPT liability falls between $2,500 and $7,500 per quarter, you’ll likely be assigned a quarterly filing frequency.  The quarterly return is due by the last day of the month following the end of the quarter.  Here’s a breakdown of quarterly deadlines:
    • 1st Quarter (Jan – Mar): Due April 30th
    • 2nd Quarter (Apr – Jun): Due July 31st
    • 3rd Quarter (Jul – Sep): Due October 31st
    • 4th Quarter (Oct – Dec): Due January 31st of the following year
  • Annually:  If your anticipated TPT liability is less than $2,500 per year, you might be assigned an annual filing frequency.  The annual return is due on the last day of the month following the end of your tax year.
Filing sales tax in Arizona

Filing sales tax in Arizona, technically called the transaction privilege tax (TPT), involves a two-step process:

Step 1: Submitting Sales Data (Filing the Return)

There are two main options for filing your TPT return in Arizona:

  • Online Filing (Recommended): The Arizona Department of Revenue (ADOR) strongly encourages electronic filing through their Arizona Business One Stop (ABOS) portal: https://businessonestop.az.gov/.  ABOS allows you to submit your return, view your filing history, and make tax payments electronically.
  • Paper Filing:  While less convenient, you can file a paper return (Form TPT-1 or TPT-2) by mail. You can find these forms on the ADOR website: https://azdor.gov/.

Step 2: Remitting Payment (Paying the Tax)

  • Electronic Payments:  The recommended method for payment is electronically through ABOS. You can use various options like ACH transfer, credit card, or debit card.
  • Mail-in Payments: If filing by paper, you can mail a check or money order payable to the Arizona Department of Revenue along with your completed TPT return.
Is anyone exempt from sales tax in Arizona?

In Arizona, there are exemptions from the transaction privilege tax (TPT), which essentially functions as the state’s sales tax, for certain categories of purchases. Here’s a breakdown of who might be exempt from Arizona sales tax:

Individuals:

  • Generally, Arizona residents don’t pay sales tax on most groceries (excluding prepared food).
  • Prescription drugs and certain medical equipment are also exempt.

Organizations:

  • Qualified non-profit organizations may be exempt from sales tax on purchases related to their exempt activities (e.g., charitable organizations buying supplies for their programs).
  • Government agencies (federal, state, and local) are generally exempt from sales tax on purchases made for governmental purposes.

Transactions:

  • Sales of certain business-to-business goods and services might be exempt if used directly in the production process (refer to ADOR guidelines for details).
  • Casual sales between individuals (e.g., garage sale purchases) are typically exempt.

Contact Yonda Tax Today

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