Welcome to our handy guide on Arizona sales tax. We'll walk you through everything you need to know, from the specific sales tax rates in different counties and cities across Arizona to answering some of the most common questions. Plus, we'll guide you on how to efficiently collect and file your sales tax in Arizona.
Sales Tax Rate
Understanding Sales Tax Nexus in ArizonaFrom October 1, 2019, there's a twist for remote sellers and marketplace facilitators in Arizona. Thanks to House Bill (H.B.) 2757, which came into play on May 31, 2019, you're now required to file and pay transaction privilege tax (TPT). This change aligns with the 2018 Supreme Court ruling in the South Dakota v. Wayfair case, which lets states collect taxes from sales by businesses that don't have a physical presence in the state. Keep in mind, this law isn't looking back; it's all about moving forward. So, if you're making sales in Arizona, it's time to keep an eye on the sales thresholds set by the state.
Economic Nexus: What's the Deal?Economic nexus in Arizona is all about the numbers. If you're a marketplace facilitator handling sales over $100,000, or a remote seller with direct sales into Arizona exceeding $200,000 in 2019, $150,000 in 2020, or $100,000 from 2021 onwards, you're in the economic nexus zone.
Physical Nexus: Making a ConnectionPhysical nexus means your business has a tangible presence in Arizona. Think about these factors:
A few examples of what counts:
Storing Stuff at Third-Party Fulfillment CentersIf you're just storing your items temporarily at a third-party center in Arizona and don't really control the place, you probably don't need to worry about physical nexus. This means you might not have a tax obligation under these circumstances.
Quick Business Visits to ArizonaIf you're in Arizona for a short time doing business, like a quick pop-in, this generally doesn't create a physical nexus. But, if these activities are regular, bring in some income, and happen often, then it's a different story. They're not just passing visits anymore, and you might need to think about nexus.
Salesperson on the MoveGot a salesperson who’s often in Arizona, selling away or supporting what you've sold? This could mean you’ve got a physical nexus in the state. It's like having a piece of your business right there in Arizona, so you'd need to handle transaction privilege tax (TPT) for sales in the state.
Remote Employees in ArizonaIf you have someone working remotely in Arizona, but they're not really involved in sales or market-building activities (think accounting or admin tasks), this alone might not create a physical nexus. But, if your overall sales hit certain numbers, you're back in the game for reporting TPT in Arizona.
Selling at Arizona Trade ShowsBringing your goods to an Arizona trade show? If you're selling there (and maybe doing similar stuff outside Arizona), you're likely to have a physical nexus during the show. This means considering a TPT license and taking care of taxes for those sales. Once you leave the state, though, your physical nexus ends unless you keep selling to Arizona customers and meet those economic nexus thresholds.
Marketplace Sellers - The Online WorldSelling on platforms like Amazon or eBay? If they handle everything (payments, deliveries), they've got the tax part covered for you. But, if you're also selling through your own website or have your stock in Arizona, you'll probably need your own tax permit.
Affiliate NexusIf there’s a significant ownership overlap between companies (over 5%), this can create an affiliate nexus. Each company linked this way might need to get their own license and decide whether to file taxes together or separately.
Click-Through Nexus? Not in ArizonaJust so you know, Arizona doesn't have any laws about click-through nexus right now.
Ice is tax-free if cubed, but taxed if it’s a block. In Arizona, the shape of your ice can shape your tax bill.
Arizona’s Unique Transaction Privilege Tax (TPT)You might find it a bit quirky, but Arizona doesn't really have a "sales tax" per se. Surprise! Instead, they have what's known as a Transaction Privilege Tax (TPT), and it's more about the privilege of doing business in the state than individual transactions. So, if you're running a business in Arizona, whether you've got a shop on the corner or you're selling cool stuff statewide, you'll need to get familiar with the TPT License.
Registering for TPT in Arizona - Here's How!There are a few different ways to get your TPT License in Arizona:
What You Need for TPT RegistrationReady to register? Make sure you have this info handy:
Cost of Registering for TPT in ArizonaNow, about the costs:
Ongoing Costs to Keep in MindOnce you're up and running, here's what to expect:
Do You Need a Federal Tax ID or EIN for Arizona Sales Tax?Yes, you do! If you're setting up shop as anything other than a sole proprietor, you'll need a Federal Tax ID or an Employer Identification Number (EIN). But don't worry, getting an EIN is like a walk in the park. You can apply for it quickly and without any hassle - it's probably one of the most stress-free experiences you'll have with the IRS!
Registering with Other Arizona AgenciesNow, depending on what your business does, you might need to make friends with a few more regulatory bodies in Arizona. This could include the Arizona Corporation Commission (ACC), the Department of Financial Institutions, the State Department of Labor, the Department of Economic Security (DES), and maybe even your local city or county licensing departments. Each business is unique, so it's worth doing a bit of detective work to see what applies to you. For a little guidance, reach out to the Arizona Department of Revenue’s License Compliance Program – they're super helpful!
Arizona: Destination-Based Sales Tax StateIn Arizona, the sales tax is all about where your customer is, not where you are. This means you'll be charging sales tax based on where your product or service gets delivered. Keep in mind, tax rates can be different across cities and counties, so you’ll want to get those details right.
How to Collect Sales Tax in Arizona
Arizona's Statewide Sales Tax Rate
Finding the Exact RateWondering what the exact sales tax rate is for a specific address? Arizona's Department of Revenue has an online Tax Rate Lookup Tool. Super handy for pinpointing the precise rate you need.
So, What's Taxable in Arizona?In Arizona, lots of stuff falls under the taxable category. Here’s a quick list:
Is Software as a Service (SaaS) Taxed?Yes, indeed! In Arizona, SaaS is generally considered taxable, whether it's downloaded or accessed remotely. But, custom-designed software for a specific client might be off the hook.
Exemptions from Sales TaxSome things get a free pass from sales tax in Arizona:
Who Gets These Exemptions?Nonprofits, government entities, schools, Native American tribes, and certain manufacturers can often skip the sales tax on their purchases. But, they need to fit specific criteria and might need to do some paperwork to prove it.
Handling Sales Tax Exemptions in ArizonaImagine you’ve got a customer who’s not required to pay sales tax. Here's what you should do, step by step, in a friendly and straightforward way:
Lost an Exemption Certificate?
Buy your ice cream in a container larger than a gallon, and it's tax-free. Arizona screams for ice cream economy size.
Sales Tax Filing Methods in Arizona
Made a Mistake? No Problem!
Arizona Sales Tax Penalties and Discounts
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