What is sales tax referred to as in Arizona?
Sales tax is referred to as Transaction Privilege Tax (TPT) - a tax on vendors for the privilege of doing business in the state of Arizona. The cost of TPT may be passed on to the customers, but it’s the seller's responsibility to manage the taxes..
As a business, do I need to collect Arizona sales tax?
Businesses are required to collect sales tax in Arizona if they have a sales tax nexus in the state. This includes having a physical presence or reaching a specific sales level, which establishes an economic nexus. This is why understanding Arizona state sales tax obligations is crucial for compliance.
Do I have a physical nexus in Arizona?
A physical nexus in the state of Arizona is established if your business has a physical presence in the state. Following are examples of physical presence that can trigger a physical nexus in the state of Arizona:
- Office: An "office" in the context of establishing a physical nexus refers to a physical location or workspace that a business maintains within the respective state. This could include a dedicated facility where administrative tasks are carried out, meetings are conducted, or business operations are managed.
- Warehouse: A "warehouse" in the context of establishing a physical nexus refers to a physical facility used for storing goods, inventory, or products within the respective state. Businesses may utilize warehouses for various purposes, such as storage, distribution, or fulfillment of orders.
- Employees (any role): In the context of establishing a physical nexus, "employees" refer to individuals who work for your business and are physically present in the respective state. These employees may be engaged in any roles, including sales, marketing, support, servicing, or other backend functions.
- Contractors (any role): "Contractors" are usually considered independent entities or individuals. They operate their own businesses and are not typically under the direct control of the hiring company. The presence of contractors triggers physical nexus in the state. These contractors may be engaged in any roles, including sales, marketing, support, servicing, or other backend functions.
How do I know if I have an economic nexus in Arizona?
An economic nexus in Arizona is determined by your sales volume. If the annual sales of your enterprise exceed the given threshold in Arizona, you must register for an Arizona sales tax permit, collect tax on sales shipped to Arizona, and remit that sales tax to the state revenue authorities.
In Arizona, an economic nexus is established for your enterprise if your sales in the state exceed 100000 based on the sales from the Current or Previous Calendar Year.
While calculating the sales or number of transactions for determining economic nexus, Arizona requires transactions made through marketplaces, like Amazon, eBay, etc. to be excluded. Transactions made for resale purposes should be included while determining whether a business has exceeded the Arizona economic nexus threshold. Finally, the sale of products that are non-taxable in Arizona should be included while determining the establishing of nexus in Arizona.
For an in-depth understanding, read our comprehensive guide on economic nexus reference periods.
Which goods are taxable in Arizona?
For businesses in Arizona, local sales tax is applicable on the sale of all tangible personal property sold at retail in the state. Services are generally not taxable in Arizona, with the following exceptions- amusements, personal property rentals, contracting, severance (metal mining), transporting, nonmetal mining, job printing, publishing, utilities, telecommunications, private (rail) car.
Businesses need to stay updated on current tax information as well as the associated obligations and exemptions to avoid any compliance issues.
What items are exempt from Arizona sales tax?
Arizona exempts several items from sales tax- mining and metallurgical supplies, prosthetics, income-producing capital equipment, natural gas or liquefied petroleum gas used to propel a motor vehicle, to name a few.
Understanding these exemptions is vital for businesses to calculate sales tax accurately in Arizona. If you are uncertain about the tax status of specific items, seek guidance from professionals at Galvix.
Is SaaS taxable in Arizona?
In Arizona, the sales tax laws consider certain types of software, SaaS, and related services as taxable. These include:
- IaaS (Infrastructure as a Service): IaaS provides virtualized computing infrastructure over the internet. It includes services like virtual machines, storage, and networking. Examples include Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform.
- PaaS (Platform as a Service): PaaS provides a platform allowing customers to develop, run, and manage applications without dealing with the complexity of building and maintaining the underlying infrastructure. Examples include Heroku and Google App Engine.
- SaaS - General (Software as a Service): SaaS delivers software applications over the internet, typically on a subscription basis. Users can access the software through a web browser. Examples include Google Workspace, Microsoft 365, and Salesforce.
- SaaS - On premises: This refers to Software as a Service installed and operated from the customer's in-house server and computing infrastructure rather than a third-party server.
- SaaS - Security: SaaS solutions focused on providing security services, such as antivirus software, firewall protection, and threat detection.
- SaaS - Storage: SaaS offerings that primarily provide storage solutions over the internet. Examples include cloud storage services like Dropbox and Google Drive.
- SaaS - With downloadable app or SDK: SaaS that comes with a downloadable application or Software Development Kit (SDK) for additional functionality or integration with other software.
- Software delivered electronically: Any software that is distributed and accessed electronically, usually over the internet, without physical media.
- Software delivered on tangible media: Software distributed and obtained through physical means, such as CDs or DVDs.
- Software delivered through load & leave: This refers to software loaded onto a system or device that does not require an ongoing internet connection.
However, sales tax laws change frequently, so it is vital to remain up-to-date with the latest regulations on the sales tax of Arizona for digital goods. Checkout our latest blog to learn more about SaaS sales tax.
What is the deadline to obtain a Arizona sales tax permit after establishing a nexus?
If a business has a physical nexus in Arizona, it must obtain a sales tax permit from the Arizona Department of Revenue and start collecting sales tax on transactions as on the date of establishing the physical nexus. Businesses that establish an economic nexus in Arizona need to obtain a sales tax permit and start collecting taxes, latest by 1st day of the month after 30 days, from the date they establish the economic nexus.
It is important to obtain the sales tax permit and start collecting taxes as per the deadlines mentioned above, in order to avoid back taxes and penalties.
How can one get a Arizona sales tax permit?
To obtain a sales tax permit in Arizona, businesses need to register with the Arizona Department of Revenue. This process is streamlined and can be completed online through the online portal provided by Arizona Department of Revenue. To comply with Arizona's sales tax laws, businesses need to get a tax permit.
To get a sales tax permit in Arizona, you need to provide detailed information about the business, such as the type of business, FEIN, personal details of the owner, business registration, nature of business activities, and several others on the Arizona Department of Revenue website. You will then get a sales tax number. This number is important for collecting, reporting, and paying the sales tax to the state government.
For detailed instructions and guidance on the registration process, connect with the experts at Galvix.
How should a business collect sales tax in Arizona?
Businesses in Arizona must collect sales tax from customers on relevant transactions. The collected tax must align with the Arizona sales tax rate, which varies by location. Enterprises should regularly verify the sales tax rates to ensure accurate collection. To learn the best practices, explore our sales tax compliance guide.
Where can I file my Arizona sales tax return?
You can file the Arizona sales tax return by visiting the online portal provided by the Arizona Department of Revenue at: https://www.aztaxes.gov/Home/Page.
When should a business file Arizona sales tax return?
Businesses in Arizona must file state sales tax returns periodically. The frequency, i.e., monthly, quarterly, or annually, is determined by the state based on the tax liability.
Typically, sales tax and use taxes is due monthly, with returns and remittances filed on or before the last weekday of next month for the previous month’s sales. However, businesses can request a different filing status based on their annual tax liability.
In general, the following are the filing deadlines for Arizona, based on the assigned filing frequency to you by the state:
- Monthly Filing: last weekday of next month
- Quarterly Filing: last weekday of 1st month after quarter end
- Yearly Filing: Last weekday of 1st month after year end
It’s crucial to adhere to the assigned schedule to avoid penalties.
How does Arizona determine the sales tax filing frequency for my business?
The Arizona Department of Revenue will assign you a filing frequency. Typically, this is determined by the size or sales volume of your business. State governments generally ask larger businesses to file more frequently.
Generally, sales tax in Arizona is due monthly, with returns and remittances to be filed on or before last weekday of next month. You may request quarterly filing status if your annual tax liability is less than 8,000. You may request annual filing status if the tax liability for the year is less than 2,000.
Are there any benefits if a business files Arizona sales tax on time?
Paper filers for Transaction Privilege Tax (TPT) are eligible to claim an accounting credit of 1% of the tax due, up to a maximum of $10,000 per calendar year. On the other hand, electronic TPT filers can claim a slightly higher accounting credit of 1.2%, with a maximum limit of $12,000 per calendar year. However, this increased credit is applicable only if all their TPT returns for the calendar year are filed electronically. It's important to note that this credit pertains specifically to the state transaction privilege tax and does not apply to local TPT.
What penalty is applicable if a business fails to file Arizona sales tax?
Penalties are applicable if a business fails to file and pay sales tax before the due date in Arizona. A late filed return is assessed a late filing penalty of 4.5% (four and one-half percent) of the tax required to be shown on the return for each month or a fraction of a month the return is late. There is a minimum of $25 and a maximum 25% of the tax due or $100, per return, whichever is greater. More details about this can be found here.
What are the key things to remember while filing sales tax in Arizona?
While filing taxes in Arizona, businesses must remember to account for sales tax holidays and potential tax discounts. Sales tax holidays offer temporary tax exemptions on specific items, and tax discounts may be available for timely filings during the reporting period. Staying updated on these can maximize compliance efficiency.
What is the sales tax on shipping in Arizona?
Shipping charges are generally exempt from Arizona transaction privilege tax (TPT) if separately stated, but taxable if included in the sale price. The tax rate aligns with the Arizona state sales tax rate applicable to the goods sold. Businesses should levy sales tax on shipping accurately for compliance. More details about this can be found here.