Arizona Transaction Privilege Tax
Sales tax is an important aspect of running a business. Whether you are operating an online or brick-and-mortar store, keeping up with Arizona's transaction privilege tax (TPT) laws is essential.
Arizona sales tax is called transaction privilege tax (TPT). It’s a gross receipts tax levied on vendors for the privilege of conducting business in the state. The cost of TPT can be passed on to customers, but the vendor must register and remit the tax. The base TPT rate in Arizona is 5.6 percent, plus county and city rates. Its overall tax climate ranks 19th on our 2024 State Business Tax Climate Index. Arizona also has a flat individual income tax rate of 2.50 percent.
You can use an online free tax calculator to find the right combined state, county, and city rate for each location where you do business. The state and local rates vary by industry, so it’s important to understand the rates that apply to you and your customers. You’ll need this information when invoicing your customers. Based on your filing frequency, TPT returns are due monthly, quarterly, or annually.
How to Pay Arizona Sales Tax?
Arizona transaction privilege tax is a gross receipts tax levied on vendors for the privilege of conducting business in the state. The cost of TPT can be passed on to customers, but the vendor must register and remit the tax. Arizona is one of the states that participates in the Streamlined Sales and Use Tax Agreement (SSUTA), which simplifies the process for remote sellers. TPT is collected and administered by the Arizona Department of Revenue (ADOR).
Generally, businesses are required to collect TPT only when they have nexus in a state. Before June 2018, states could only require nexus through physical presence. Now, many states allow retailers to trigger nexus through economic and virtual connections to the state. This is known as economic nexus. Filing and paying your returns is time once you’ve registered and remitted TPT. The filing frequency and due dates depend on your assigned filing frequency and the state’s rules for TPT rates. A solution that supports e-filing and electronic payment is the best way to file.
Arizona Sales Tax Exemption
Nonprofit organizations are not exempt from TPT passed on by vendors, but they may be exempt on specific sales if certain requirements are met. The state TPT rate is 5.6%, and counties and local jurisdictions can add to this base rate. Businesses must report and remit TPT on a quarterly basis. For more information about TPT, visit the Arizona Department of Revenue’s website.
Arizona Sales Tax Due Dates
AZ Sales Tax Due Dates depend on the filing frequency assigned by AZDOR (monthly, quarterly, or annually). Returns must be filed before the end of the period. If the due date falls on a weekend or holiday, it is adjusted to the next business day. Typically, the first half of taxes are due October 1st, and the second half is due May 1st. If one or the other of these dates is missed, a delinquent penalty will begin accruing.
Once a business is selected for an Arizona sales tax audit, the auditor will request documents and books of accounts to compare with reported sales. Once the audit is complete, the auditor will issue an audit report with corresponding work papers. At this point, a taxpayer has the opportunity to agree with or protest the audit findings. It is a good idea to have a sales tax professional review the audit report for issues that can be challenged. Otherwise, agreeing to an incorrect assessment and overpaying the state can be easy. A tax protest or appeal must be filed within 30 days of the decision if the taxpayer disagrees with the outcome.
