The ultimate guide to Arizona sales tax

2024 overview of sales tax in Arizona

Welcome to Kintsugi's rundown on what is the Arizona sales tax rate, including the phoenix sales tax, and the various tax rates in the state. The Arizona sales tax rate can vary depending on state, county/city, and local tax rates, which collectively make up the sales tax in AZ.

As of 2024, the base AZ state sales tax rate in Arizona is 5.6%. The highest county sales tax rate can be found in Yuma County at 1.0%, while the lowest is in La Paz County at 0.5%.

For district taxes, some of the highest rates are seen in the Phoenix Special Taxing Districts at 2.3%, including the phoenix sales tax, reflecting the diverse sales tax Arizona setup, while the lowest district tax rate is located in the Gilbert Special Taxing District at 0.3%.

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.

Understanding use tax in Arizona

Use tax in Arizona is a tax on purchases made from out-of-state sellers for use, storage, or consumption within the state.

It is designed to complement the transaction privilege tax (TPT), ensuring that both in-state and out-of-state purchases are taxed similarly. The use tax rate typically mirrors the TPT rate, which varies by location due to additional county and municipality rates.

The primary scenario in which use tax applies is when an individual or business buys goods from an out-of-state retailer that does not collect Arizona sales tax. Common examples include online purchases, catalog orders, and goods bought while traveling. When the seller does not charge Arizona's TPT, the responsibility to report and pay use tax falls on the buyer.

For businesses, the process of handling use tax and adjusting for the AZ state sales tax rate involves meticulous record-keeping. They must track all relevant purchases and report them on their Arizona TPT return.

Arizona offers the convenience of filing and paying both use tax and AZ state sales tax through its online services platform, AZTaxes.gov.

Individuals also have an obligation to pay use tax, although it is less commonly known. Suppose an Arizona resident buys a $1,000 laptop online from a retailer who does not collect Arizona tax, including az sales tax. That resident must report and pay the applicable use tax to the Arizona Department of Revenue (ADOR).

The Arizona Department of Revenue actively educates taxpayers about their use tax responsibilities, aiming to minimize non-compliance. Common methods include taxpayer education campaigns and providing online resources like calculators and FAQs.

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.

Other Sales Tax Considerations

Transaction Privilege Tax (TPT): Arizona's primary tax on sales transactions is called the Transaction Privilege Tax. Businesses are taxed for the privilege of doing business in the state, and this tax is passed on to the consumer. The state-level TPT rate is 5.6%, but when combined with local rates, the total can be higher.

Use Tax: This applies to goods purchased outside Arizona but used within the state. If sales tax wasn't collected at the point of sale, the use tax ensures that the appropriate tax is still paid.

Digital Goods and Services: Some digital goods and services may be subject to TPT. This includes things like software downloads or streaming services, depending on how the service is delivered and used.

Food and Prescription Drugs: Generally, sales of food for home consumption and prescription drugs are exempt from TPT, though some local jurisdictions may impose their own taxes on these items.

Marketplace Facilitators: As of recent legislative changes, online marketplace facilitators (like Amazon and eBay) are required to collect and remit sales tax on third-party sales made through their platforms.

Understanding nexus in Arizona for local and out-of-state sellers

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.

Affiliate nexus

Affiliate nexus rules for sales tax in Arizona define the situations under which out-of-state businesses have to collect and remit sales tax based on their relationship with in-state entities.

In 2024, these rules maintain the framework from 2023 but incorporate some key changes:

Affiliate Degree

2023: Businesses were considered to have a nexus if affiliated entities in Arizona conducted activities that significantly enhanced sales.

2024: Further clarification provided; relationships now explicitly include marketing affiliates and content creators, establishing nexus if combined sales exceed $100,000.

Physical Presence Relevance

2023: Nexus established if the out-of-state business had an in-state warehouse, office, or employees.

2024: Emphasis shifted towards any temporary physical presence, such as pop-up stores or trade show booths, regardless of duration.

Click-Through Nexus

2023: Established if in-state affiliates referred customers via links, contributing to $10,000 in sales.

2024: Threshold lowered to $5,000, making it easier for smaller businesses to reach nexus requirements.

Marketplace Facilitators

2023: Must collect and remit sales tax on behalf of sellers if sales exceed $100,000 or 200 transactions.

2024: Transactions criterion removed; facilitators now required to collect if cumulative sales are $100,000, reflecting the focus on revenue over volume.

Remote Seller Threshold

2023: Remote sellers needed to collect tax if sales into Arizona exceeded $100,000 or 200 transactions.

2024: Now, only sales volume criterion applies; threshold remains $100,000, aligning with the streamlined approach across various nexus definitions.

Click-through nexus

In 2024, Arizona's approach to click-through nexus for sales tax has undergone several updates compared to 2023:

Threshold Changes

In 2024, Arizona has increased the sales threshold requiring out-of-state sellers to collect sales tax from $100,000 to $150,000 in gross sales.

This adjustment reflects the state's response to growing e-commerce activities and aims to capture a broader base of taxable transactions.

Remote Seller Responsibilities

For 2024, Arizona has simplified compliance obligations for remote sellers by integrating more sophisticated software solutions.

Unlike in 2023, when sellers had to manually track sales and submit detailed reports, the new system automates many of these processes, reducing administrative burdens.

Enforcement Enhancements

Arizona has enhanced its enforcement mechanisms in 2024 by increasing funding for audit and compliance efforts.

In 2023, enforcement was more ad hoc, with fewer resources dedicated to identifying non-compliant sellers. The 2024 regulations aim for more consistent enforcement to ensure compliance.

Marketplace Facilitators

The role of marketplace facilitators has expanded in 2024. These entities now bear greater responsibility for collecting and remitting sales tax on behalf of third-party sellers.

In 2023, the rules were less stringent, often leaving small sellers to manage tax obligations independently.

Education and Outreach

Arizona has increased its educational outreach in 2024, providing extensive guidance and resources to remote sellers about compliance requirements.

Unlike in 2023, when educational efforts were limited, the 2024 initiatives include webinars, detailed guides, and dedicated support services.

Penalties and Interest

Penalties for non-compliance in 2024 have been restructured to ensure timely payment of taxes and correct reporting of any type of eligible sales tax deduction. The changes include higher interest rates on late payments and a tiered penalty system based on the severity of the infraction.

In 2023, penalties were more uniform, often not reflecting the degree of non-compliance.

Marketplace nexus

In 2024, Arizona's marketplace nexus rules for sales tax have seen some updates compared to 2023:

Threshold Changes

In 2023, Arizona had a threshold of $100,000 in gross sales for remote sellers and marketplace facilitators.

For 2024, this threshold remains the same, meaning no significant changes in the minimum sales required for a business to establish nexus.

Remote Sellers and Marketplace Facilitators

Both 2023 and 2024 treat remote sellers and marketplace facilitators similarly.

Businesses that exceed the threshold must comply with Arizona’s sales tax obligations, which include collecting and remitting taxes.

Tax Rates

The primary sales tax rate in Arizona for both years remains unchanged.

While individual municipal rates may have experienced adjustments, the overarching state tax rate has not been altered from its 2023 level.

Compliance Requirements

Compliance regulations and guidelines offered by the Arizona Department of Revenue have not seen major changes from 2023 to 2024.

Trade shows

In Arizona, 2024 brings various trade shows and related sales tax obligations:

Sales Tax Nexus: Presence at tradeshows may establish a tax nexus, requiring collection of transaction privilege tax (TPT).

TPT License: Businesses must obtain a TPT license from the Arizona Department of Revenue before engaging in sales.

Tax Rate: Arizona TPT rates vary by location; vendors should apply the correct rate based on the event’s location.

Reporting: TPT must be reported and remitted monthly, even for single-event participation.

Exempt Sales: Some items (e.g., wholesale sales) may be tax-exempt; vendors should verify exemptions.

Use Tax: If TPT isn’t collected, vendors may owe use tax on goods sold.

Temporary Locations: Vendors can register temporary business locations for specific events.

Compliance: Vendors must keep accurate records and submit required TPT returns.

Penalties: Non-compliance can result in penalties and interest.

Special Event Notifications: Some jurisdictions require advance notification of participation in events.

Fulfillment by Amazon and nexus

Fulfillment by Amazon (FBA) is a service wherein Amazon handles storage, packaging, and shipping of products for third-party sellers.

Sellers send their products to Amazon fulfillment centers; Amazon takes over inventory storage, order processing, and customer service. Key advantages include broad reach, Prime eligibility, and enhanced logistics management, but there are fees for storage and fulfillment.

2024 FBA-Specific Sales Tax Obligations on Sellers

Nexus: Sellers with inventory in Arizona fulfillment centers establish nexus, meaning they have a sufficient physical presence in the state, triggering sales tax obligations.

Registration: Sellers must register for an Arizona Transaction Privilege Tax (TPT) license to legally collect and remit sales tax.

Collection: Sellers must collect state and applicable local sales tax on all taxable sales to Arizona customers.

Filing: Sellers must file TPT returns, reporting and remitting collected taxes, typically on a monthly or quarterly basis, depending on business volume.

Tax Rates: The combined sales tax rate includes the state rate of 5.6% plus any applicable local rates, which vary by location.

Exemptions: Certain products may be exempt from sales tax, such as prescription medications and some food items. Sellers need to be aware of these exemptions to ensure compliance.

Marketplace Facilitator: Amazon, as a marketplace facilitator, is required to handle sales tax collection and remittance on behalf of third-party sellers. However, sellers should confirm this process aligns with Arizona’s updated legislation and remain compliant with any direct reporting requirements.

Permits, certificates and sales tax registration in Arizona

Registering for sales tax in Arizona in 2024 involves obtaining a Transaction Privilege Tax (TPT) license.

Businesses must complete the Arizona Joint Tax Application (JT-1) through the Arizona Department of Revenue. Key information needed includes business details, ownership information, and locations of operation. Once the application is processed, businesses must file regular TPT returns, reporting and remitting the collected sales tax.

Registering for sales tax collection in Arizona

To register for sales tax collection in Arizona in 2024, follow these steps:

Determine Your Obligations: Confirm whether you need to register for a Transaction Privilege Tax (TPT) license, which is Arizona's form of sales tax.

Gather Required Information: Have your business details ready, including your business name, address, and other relevant information like your Federal Employer Identification Number (FEIN) or Social Security Number (SSN) for sole proprietors.

Create an Arizona Tax Account: If you do not already have an account, you'll need to create one with the Arizona Department of Revenue (ADOR).

Complete the Licensing Application: Fill out the Joint Tax Application (JT-1) form. This form is used to apply for a TPT license and other business-related licenses.

Submit Your Application: Submit your completed application. This can usually be done online through the ADOR website, or by mailing the form to the ADOR office.

Pay the Required Fees: Be prepared to pay any necessary fees associated with your TPT license application. Fees may vary based on the type and location of your business.

Receive Your License: Once your application is processed and approved, you will receive your TPT license.

Setup Filing and Payment Systems: Ensure you have systems in place for collecting, reporting, and remitting TPT to the ADOR on a regular basis.

Cost of registering for sales tax in Arizona in 2024

The cost to register for a Transaction Privilege Tax (TPT) license, which is commonly referred to as sales tax, in Arizona in 2024 is $12 per location per year.

This fee applies regardless of whether the business operates from a physical location or online. There may be additional fees depending on the specific city or town where the business operates, as some local jurisdictions have their own licensing fees.

Federal tax ID requirements for registering

In Arizona, if you are registering for a Transaction Privilege Tax (TPT) License, which is the equivalent of a sales tax permit in the state, you will generally need an Employer Identification Number (EIN) if your business has employees or if you operate your business as a corporation or partnership.

Even for sole proprietorships and single-member LLCs, having an EIN can be beneficial.

Do You Need an EIN?

• Yes, if you have employees.
• Yes, if you operate as a corporation or partnership.
• Yes, if you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco, and Firearms.
• Yes, if you withhold taxes on income, other than wages, paid to a non-resident alien.
• Yes, if you have a Keogh plan or operate any of the following types of organizations: Trusts (except certain grantor-owned revocable trusts), IRAs, Exempt Organization Business Income Tax Returns, Estates, Real estate mortgage investment conduits, Non-profit organizations, Farmers' cooperatives, or Plan administrators.

Where to Register for an EIN

You can apply for an EIN through the IRS website: Apply for an EIN Online

Where to Register for TPT

Once you have your EIN, you can register for the TPT License through the Arizona Department of Revenue: Arizona Department of Revenue - TPT Application

Steps to Apply for TPT License

• Visit the Arizona Department of Revenue's website.
• Create an account or log in to an existing one.
• Fill out the TPT Application form with the necessary business information, including your EIN.

Streamlined sales tax program and Arizona

As of January 2022, Arizona is not a full member of the Streamlined Sales and Use Tax Agreement (SSUTA), commonly known as the Streamlined Sales Tax (SST) program. The SST program aims to simplify and modernize sales and use tax administration to reduce the burden of tax compliance.

However, tax laws and memberships in such programs can change. It would be wise to consult the most current resources or the official SST website, or contact the Arizona Department of Revenue for the latest information regarding Arizona's status in the SST program as of 2024.

Acquiring a business and registering for sales tax in Arizona

When acquiring a business in Arizona, you'll need to register for a Transaction Privilege Tax (TPT), which is similar to a sales tax. Here are the steps and requirements for sales tax registration:

Obtain an EIN

If you don't already have an Employer Identification Number (EIN) from the IRS, you'll need to obtain one. This is required for your business tax filings.

Complete the Arizona Joint Tax Application

This application (JT-1) is used to apply for a TPT license. You can complete it online through the Arizona Department of Revenue's (ADOR) website or obtain a paper form from the ADOR.

Provide Business Information

The application will require detailed information about your business, including:

• Business name and address.
• Type of business and activities.
• Owner/officer information.
• EIN or Social Security Number (SSN) for sole proprietors.

Previous License Information

If the previous owner had a TPT license, you'll need to provide details about that license.

File and Pay Fees

Submit the completed application along with the applicable fees. The licensing fee can vary depending on the locations and the nature of the business.

Local Licensing

Depending on where in Arizona the business operates, you may also need to apply for local business licenses. Some cities and towns have their own additional licensing requirements and fees.

Completion and Receipt of License

After the application is processed and approved, you will receive your TPT license, which authorizes you to collect and remit sales tax in Arizona.

Other Arizona registrations to consider

In Arizona, aside from sales tax, you may also need to consider other registrations depending on the nature of your business and its operations. Here are a few key registrations you might need:

Transaction Privilege Tax (TPT) License: Often referred to as sales tax, but technically it is a tax on the privilege of conducting business in Arizona. Most businesses will need to obtain this license.

Employer Identification Number (EIN): If you have employees, you'll need to get an EIN from the Internal Revenue Service (IRS). While this is federal, it is essential for state reporting and tax purposes.

Unemployment Insurance Tax Registration: If you have employees, you will also need to register for unemployment insurance tax through the Arizona Department of Economic Security.

Withholding Tax Registration: Again, if you have employees, you need to register for state income tax withholding.

Professional and Occupational Licenses: Depending on your profession, you might need specific state licenses (e.g., contractors, real estate agents, healthcare providers).

Local Business Licenses and Permits: Various cities and counties in Arizona might require local business licenses or permits. Check with the local municipality where your business operates.

Trade Name Registration: If you are operating under a name different from your legal business name, you might need to register your trade name (also known as a "doing business as" or DBA).

Industry-Specific Licenses: Certain industries such as food service, alcohol sales, and transportation may require additional licenses and permits.

Requirements for online sellers in Arizona

Yes, online sellers in Arizona have specific requirements for collecting sales tax.

Any remote seller or marketplace facilitator that has annual gross proceeds of sales or gross income derived from sales in Arizona of $100,000 or more must register with the Arizona Department of Revenue and collect and remit transaction privilege tax (TPT), which is Arizona's version of sales tax.

Starting in 2024, the thresholds or specific stipulations might be updated, so it's crucial to stay informed on any legislative changes that could affect your obligations. For instance, if a seller’s gross income or sales reach or exceed the threshold within a calendar year, the seller must comply with TPT requirements starting in the following month.

Also, marketplace facilitators, those who provide platforms for sellers to reach customers, are also obligated to collect and remit TPT on behalf of their sellers once they meet the threshold.

Collecting sales tax in Arizona

In 2024, collecting sales tax in Arizona involves understanding the state's transaction privilege tax (TPT) system. Businesses must register with the Arizona Department of Revenue, accurately categorize their transactions, and comply with regular filing and payment schedules to ensure compliance and avoid penalties.

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.

Non-taxable products in Arizona

In Arizona, certain product genres are generally exempt from sales tax. Things are changing all the time so please refer to the Arizona Department of Revenue for more information about taxable items within Arizona: Arizona Department of Revenue.

Groceries: Most food items intended for home consumption, such as vegetables, fruits, meats, dairy products, and bakery items, are typically exempt from sales tax.

Prescription Medications: Prescription drugs prescribed by a medical professional are not subject to sales tax.

Medical Equipment: Certain medical devices and supplies, such as prosthetics, orthotics, and durable medical equipment prescribed by a healthcare provider, may be exempt from sales tax.

Utilities: Residential utilities, such as electricity, gas, and water, are generally exempt from sales tax.

Agricultural Supplies: Items used in farming, such as seeds, fertilizers, and pesticides, may also be exempt from 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.

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.

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.

Filing sales tax returns in Arizona

How to File Sales Taxes in Arizona for 2024

For detailed information and to access filing resources, visit the Arizona Department of Revenue website: Arizona Department of Revenue – TPT & Sales Taxes:

Determine Tax Liability: Assess if your business must collect sales tax based on the state's economic nexus laws.

Register for a TPT License: Obtain a Transaction Privilege Tax (TPT) license from the Arizona Department of Revenue (ADOR).

Maintain Accurate Records: Keep detailed records of all sales transactions, including taxable and exempt sales.

Calculate Sales Tax: Apply the relevant tax rates for the state and specific local jurisdictions where sales occur.

File Sales Tax Returns: Submit regular returns, usually monthly, quarterly, or annually, based on your business volume and ADOR requirements.

Submit Payment: Pay the calculated sales tax owed by the specified due dates to avoid penalties and interest.

Utilize E-Services: Use the ADOR’s online portal for convenient filing and payment of sales taxes.

Claim Exemptions Properly: Ensure all claimed exemptions are documented with valid exemption certificates.

Stay Updated with Rate Changes: Regularly check for updates on tax rates and regulations to ensure compliance.

Consult ADOR Resources: Use ADOR provided guides and customer service for assistance with complex tax situations.

Sales tax filing frequency

In the state of Arizona, the frequency of filing and paying sales taxes depends primarily on the volume of gross sales that a business reports.

The Arizona Department of Revenue (ADOR) categorizes businesses into different filing frequencies based on their taxable sales volumes, and these frequencies can be monthly, quarterly, or annually:

Monthly Filing: Businesses with higher sales volumes are typically required to file and pay sales taxes on a monthly basis. This means that a business must submit a sales tax return and the corresponding payment to ADOR by the 20th day of the month following the reporting month. For example, for sales made in January, the return and payment are due by February 20th.

Quarterly Filing: Businesses with moderate sales volumes may be eligible to file and pay sales taxes on a quarterly basis. This means that the business submits a sales tax return and payment by the 20th day of the month following the end of the quarter. For example, for sales made in the first quarter (January through March), the return and payment are due by April 20th.

Annual Filing: Smaller businesses with lower sales volumes may be permitted to file and pay sales taxes on an annual basis. This involves submitting a sales tax return and the payment by January 20th of the following year for all sales made during the entire previous calendar year.

Filing when no sales tax has been collected

In Arizona, if you're registered for sales tax but fail to collect it, you're still liable to the state's Department of Revenue for the tax owed.

This means you'll need to pay the sales tax out of your own pocket. Additionally, you may face penalties and interest for non-compliance. Regular audits may uncover such discrepancies, resulting in further scrutiny of your business practices.

Penalties for late filing and non-payment of sales taxes

In Arizona, late sales tax filing and non-payment of sales taxes can result in significant penalties and interest.

Sales tax returns must typically be filed by the 20th of the month following the reporting period. If you miss this deadline, the Arizona Department of Revenue (ADOR) imposes a late filing penalty, which is 4.5% of the tax due per month, up to a maximum of 25%.

Additionally, interest is charged on any unpaid taxes, which accrues daily from the original due date until the balance is paid in full.

Failure to pay sales taxes can trigger even more severe consequences. Non-payment not only incurs the aforementioned late filing penalties and interest but also subjects the business to further enforcement actions.

ADOR may issue a tax lien or levy on your business property, and continued non-compliance can lead to license suspension or revocation, effectively halting business operations. If a business faces difficulties, it is advisable to contact ADOR immediately to explore options like payment plans or other relief measures.

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.

2024 sales tax filing due dates for Arizona

Monthly: 20th of the following month

Quarterly: 20th after quarter end

Annually: January 20, 2025

Shipping and sales tax in Arizona

When to pay tax on shipping in Arizona

For 2024 in Arizona, whether a business pays sales tax on shipping charges can depend on specific situations:

Shipping Charges as Part of the Sale

If shipping or delivery charges are included in the sale price (i.e., they are not separately stated), then these charges are generally subject to sales tax.

This means if you advertise a single price for a product and that includes the cost of shipping, the entire amount is taxable.

Separately Stated Shipping Charges

If the shipping charges are separately stated from the price of the goods on the invoice or receipt, they are typically not subject to sales tax.

This means if you list the cost of the product and the cost of shipping as separate line items, the shipping cost is usually not taxed.

Freight Charges

Freight charges can also be exempt if they are stated separately and pertain to the post-sale transportation of goods.