Wellton AZ Sales Tax:
What Businesses Must Know

Sales tax range in Arizona

In 2024, Arizona's sales tax rates exhibit certain changes compared to the previous year, 2023. The state sales tax rate remains stable at 5.6%. Counties also show variations, with some counties experiencing minor rate increases while others remain unchanged.

However, due to adjustments at the city and county levels, the overall Arizona sales tax rate, including phoenix az sales tax, has seen some fluctuations. To estimate your exact tax obligations, including what is the sales tax in Arizona, you can use an Arizona sales tax calculator:

Phoenix: In 2023, Phoenix had a combined sales tax rate of 8.6%, which has increased to 8.8% in 2024 due to a slight adjustment in the local phoenix sales tax.

Tucson: Tucson’s combined sales tax rate was 8.7% in 2023. In 2024, it has risen to 8.9%, reflecting an increase in the local tax portion.

Mesa: The combined sales tax rate in Mesa was 8.3% in 2023. This rate remains unchanged in 2024, maintaining its position among the more stable cities.

Chandler: Chandler's combined sales tax rate stood at 7.8% in 2023. Moving into 2024, the rate has ticked up to 8.0% due to local adjustments.

Glendale: Glendale had a combined sales tax rate of 9.2% in 2023. This rate remains at 9.2% in 2024, showing no changes.

Scottsdale: The combined sales tax rate in Scottsdale was 8.05% in 2023. In 2024, it has increased to 8.15%, reflecting a small rise in local taxes including the Scottsdale AZ sales tax.

Gilbert: Gilbert's combined sales tax rate was 7.8% in 2023. In 2024, this rate has been adjusted to 8.0%, following local tax changes.

Calculating Arizona sales tax

Determine the Tax Rate

• State Base Rate: 5.6%.
• Local Rates: Vary by city and county, ranging from 0% to 5%.

Identify Applicable Local Rates

Check city and county tax rates and find answers to questions like what is the Scottsdale AZ sales tax on official local government websites, especially if you want to understand the intricacies of the sales tax in AZ.

E-commerce Sales Tax

• State Base Rate: 5.6%.
• Local Rates: Add applicable city and county rates.
• Remote Sellers: Required to collect if annual gross sales exceed $100,000.

Software as a Service (SaaS) Tax

• Generally treated as tangible personal property.
• State Base Rate: 5.6%.
• Local Rates: Vary; check specific local jurisdictions.

Services Tax

Most services are generally exempt from sales tax. Exceptions: Certain labor services related to installation or repair may be taxable depending on the city/county.

Calculate Total Sales Tax

Combine the state base rate and applicable local rates. Example: If State Rate = 5.6% and Local Rate = 2%, Total Tax Rate = 5.6% + 2% = 7.6%.

Application for E-commerce Transactions

State Rate: 5.6%. Add the buyer’s local city and county rates if applicable.

Application for SaaS Transactions

Consider SaaS as tangible personal property. Apply the state base rate and any applicable local rates.

Application for Service Transactions

Verify if the particular service is taxable. If taxable due to city/county regulations, apply appropriate local rate.

Final Calculation Steps

Multiply the total sales tax rate by the sale amount. Ensure all components (state and local) are included for accuracy.

Recent changes to Arizona sales tax

When navigating the financial landscape of Arizona, it’s crucial to understand the state's tax rates. The Arizona tax rate, often referred to as the tax rate in Arizona, encompasses various forms of taxation that affect both businesses and individuals. Specifically, the Arizona Transaction Privilege Tax (AZ TPT) is a key component of this system. Unlike a traditional sales tax, the AZ TPT is a tax on the privilege of doing business in the state and applies to a broad range of activities. Understanding these tax rates and how they apply to your business can help in effective tax planning and compliance, ensuring you stay aligned with Arizona's financial regulations.

In 2024, Arizona introduced several notable changes to its sales tax regulations. These adjustments were designed to streamline tax collection and increase state revenue.

Increased Sales Tax Rate

Beginning January 1, 2024, Arizona increased its base sales tax rate from 5.6% to 6.0%.

In comparison, the 2023 rate remained at 5.6%. This hike aims to boost funding for statewide infrastructure projects.

Expansion of Taxable Goods and Services

The state now includes several new categories under taxable goods and services. For instance, digital products such as e-books and online streaming services, which were previously exempt, are now taxed at the general sales tax rate.

This change was also effective from January 1, 2024.

Threshold Adjustment for Online Sellers

In 2023, remote sellers with annual gross sales exceeding $100,000 were required to collect and remit Arizona sales tax, which contributes to the overall sales tax in AZ.

As of July 1, 2024, this threshold was reduced to $50,000, compelling more online retailers to comply with Arizona's tax laws.

Local Tax Rate Adjustments

Several municipalities within Arizona adjusted their local sales tax rates at various points in 2024.

For instance, Phoenix increased its city sales tax from 2.3% to 2.5% on March 1, 2024. These changes aimed to address local budgetary needs.

Sales Tax Holiday Introduction

Arizona introduced its first-ever sales tax holiday on back-to-school items, including clothing, school supplies, and computers, occurring in the first weekend of August 2024, benefiting those who usually pay phoenix az sales tax.

This provision did not exist in 2023 and aims to provide financial relief to families during the back-to-school season.

Excise and discretionary taxes and other sales tax considerations in Arizona

Excise Taxes

Fuel Tax

Arizona imposes a fuel tax on gasoline and diesel fuel. As of 2024, the tax rates are:

Gasoline: $0.18 per gallon.

Diesel: $0.26 per gallon. This tax is used primarily for state transportation funding.

Tobacco and Alcohol Taxes

Cigarettes: There is an excise tax of $2.00 per pack of 20 cigarettes.

Alcohol: Excise taxes vary by type of alcoholic beverage, with rates generally higher for spirits than for beer and wine.

Medical Marijuana: Arizona levies excise taxes on the sale of medical marijuana products.

Discretionary Taxes

These are taxes that can be implemented at the local level to fund specific projects or services:

Local Sales Tax (Transaction Privilege Tax, TPT): In addition to the state sales tax, local jurisdictions may levy their own sales taxes. The combined rate varies but can range from 5.6% to over 10% depending on the locality.

Tourism Taxes: Some cities like Phoenix and Tucson levy an additional tax on hotel stays and rental vehicles. These are often used to fund tourism-related infrastructure and services.

Understanding origin vs. destination sales tax collection

As of 2024, Arizona operates as a destination-based sales tax jurisdiction.

This means that the tax rate applicable to a sale is determined based on the location where the product is delivered or the service is provided, rather than the location of the seller. This aligns with the principle that taxes should benefit the community where the goods or services are consumed.

For more detailed information, you can refer to the Arizona Department of Revenue's publication on transaction privilege tax guidelines.

Taxable products in Arizona

In 2024, Arizona imposes sales tax, officially known as the Transaction Privilege Tax (TPT), on a variety of goods and services:

Tangible Personal Property

General Merchandise: Includes items such as clothing, electronics, furniture, and household goods.

Groceries: While many food items are exempt, prepared foods and certain beverages are taxable.

Vehicles: Taxes are applied on the sale of motor vehicles, boats, and other forms of transportation.

Utilities: Including the sale of electricity, water, natural gas, and telecommunications services.

Digital Goods and Services

Digital Products: This can include downloaded software, music, movies, and e-books, though taxation on digital goods can vary.

Online Services: Some online services and subscriptions may also be subject to sales tax.

Services

Professional Services: Legal, accounting, and certain consulting services may be taxed depending on the specifics of the transaction.

Repair Services: Repairs to tangible personal property, including electronics and appliances, can incur sales tax.

Personal Services: Some personal services, such as gym memberships and personal training, may be taxable.

Hospitality and Recreation

Lodging: Hotel and short-term rental stays are subject to sales tax.

Dining: Restaurant meals, take-out, and catering services are taxed.

Amusements: Tickets to events such as concerts, sporting events, and movies may incur sales tax.

Construction and Contracting

Contracting: Construction services, including labor and materials provided by contractors, are subject to TPT.

Home Improvements: Remodeling and repair services to real property could incur sales tax.

Miscellaneous

Medical Devices and Products: Some medical devices and over-the-counter medicines may be taxable.

Alcohol and Tobacco: These products are subject to specific excise taxes in addition to general sales tax.

Is SaaS taxable in Arizona?

In Arizona, Software as a Service (SaaS) is generally not considered taxable.

The state does not impose sales tax on services, and SaaS falls into this category since it is a service delivered electronically rather than tangible personal property.

Are digital products taxable in Arizona?

In Arizona, digital products are generally not subject to sales tax as tangible personal property.

However, if digital goods are sold in a manner that includes any tangible media or physical component, they may be taxable.

Are services taxable in Arizona?

In Arizona, most services are generally not subject to sales tax.

However, some services related to tangible personal property and specific industries may be taxable. For example, services like maintenance, repair, or installation can incur taxes if they involve taxable items.

Physical nexus

Physical nexus in Arizona refers to having a tangible presence within the state, such as an office, warehouse, employees, or inventory.

Notably, Arizona follows the guidelines established under the South Dakota v. Wayfair, Inc. decision for economic nexus, but physical nexus remains a critical factor as well.

Comparison of Physical Nexus Criteria: 2024 vs. 2023

Employee Presence: Sustained in 2024 as in 2023, having employees in Arizona creates a physical nexus obligation for sales tax.

Office or Place of Business: Remains unchanged from 2023 to 2024; maintaining an office, storefront, or a similar place of business in Arizona establishes physical nexus.

Inventory Storage: Continues to be a nexus-creating activity both in 2023 and 2024; warehousing inventory in Arizona mandates sales tax compliance.

Property Ownership: No changes from 2023, owning or leasing real or tangible personal property in the state creates a physical nexus.

Trade Show Participation: As in 2023, regularly attending or participating in trade shows in Arizona without generating substantial sales can still establish nexus in 2024 if other nexus factors are met.

Economic nexus

In 2024, Arizona continues to enforce economic nexus laws for sales tax, which were established to ensure out-of-state sellers remit taxes similarly to in-state businesses.

The economic nexus thresholds remain consistent with the 2023 regulations for simplicity and fairness in tax collection:

Key points for 2024

Remote sellers must collect and remit sales tax if their gross sales revenue exceeds $100,000 within Arizona during the current or previous calendar year.

Marketplace facilitators, defined as those who manage sales for third-party sellers, must also adhere to the $100,000 threshold if their platform-generated gross receipts reach this limit.

Tax compliance requirements include registering with the Arizona Department of Revenue, collecting the appropriate sales tax rate, filing regular returns, and remitting collected taxes punctually.

Comparison with 2023

The economic threshold for remote sellers in 2023 was $100,000, unchanged in 2024, maintaining the straightforward compliance requirement.

The threshold for marketplace facilitators remains identical at $100,000 in both 2023 and 2024, ensuring continuous obligations for these platforms.

Tax compliance procedures, such as registration, collection, filing, and remittance, are consistent across both years, indicating no new procedural changes.

Sales tax exemption certificates

In Arizona, sales tax exemption certificates allow qualified buyers to make tax-free purchases of goods and services. These certificates are typically issued to entities such as government agencies, non-profit organizations, and resellers who purchase items for resale rather than for personal use.

To obtain an exemption, the buyer must provide the seller with a valid exemption certificate outlining their tax-exempt status. Retailers must keep these certificates on file to substantiate the tax-exempt sales during audits.

It's crucial that the certificates are properly completed, including details such as the buyer's information, type of exemption, and signature, ensuring compliance with state regulations.

Sales tax discounts and incentives

In 2024, Arizona continues to offer several sales tax incentives and discounts to businesses to attract investment and support economic growth. Key incentives include:

Qualified Facility Tax Credit

This incentive aims to encourage businesses to establish or expand qualified facilities, such as manufacturing plants or headquarters.

Eligible businesses may receive tax credits against their corporate income or premium tax liabilities based on their capital investment and job creation metrics.

Sales Tax Exemptions for Machinery and Equipment

Manufacturing and mining businesses can benefit from exemptions on the sales tax for machinery and equipment used directly in production processes.

This can significantly reduce the costs associated with setting up or expanding production capabilities.

Construction Contracting Sales Tax Exemptions

Arizona offers specific exemptions from sales tax for contractors engaged in certain types of construction projects.

For example, contractors working on projects related to wastewater treatment facilities or renewable energy installations may be eligible for sales tax exemptions on construction materials.

Research and Development (R&D) Tax Credit

Businesses investing in R&D can receive tax credits, which can include relief from sales tax on expenditures related to qualifying research activities.

This incentive is designed to bolster innovation and technological advancements within the state.

State tax holidays in Arizona for 2024

Sales tax holidays are limited periods when sales taxes on specific products are temporarily waived to encourage consumer spending and ease financial burden.

Arizona does not have any sales tax holidays for 2024.