Sales Tax Updates in Arizona

Tax Professionals' Resource
December 26, 2012 — 1,178 views  
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If you sell a product or offer a service subject to the Transaction Privilege Tax, you are required to have a Transaction Privilege Tax (TPT) business license from the Arizona Department of Revenue. It is also necessary that a business owner carry a business/occupational license from the city where their business is based or where it does business.

The current Arizona state sales tax rate is 6.6% with a limit on total sales tax of 10.6% when including local and city sales taxes. All Arizona counties also levy an additional tax which is figured into the total State of Arizona TPT. Under state regulations both groceries (unprepared food for home consumption) and prescription drugs (those prescribed by a licensed doctor or dentist) are exempt from state sales tax. However, cities and counties are permitted to levy sales tax on food. There are also additional taxes charged by both hotels and taxi services.

Technically, the State of Arizona’s Transaction Privilege Tax is a gross receipts tax. Unlike an actual sales tax, it is levied on the vendors for the privilege of doing business in the state. While it is commonly called a sales tax, the TPT differs in that it is imposed on the vendor rather than the buyer. However, that sales tax may be passed on to the consumer. I both the vendor of record and the consumer reside in Arizona then a sales tax can be imposed on internet purchases as well.

The use tax is also imposed in the State of Arizona under A.R.S. § 42-5155(A). It is exacted on tangible personal property sales which are used, stored or consumed in the State of Arizona when those sales do not fall under the Transaction Privilege Tax category and have not been collected by the retailer. The use tax is not imposed on tangible personal property purchased for resale or casual sales (those sales defined as made by a seller who is not in the business of selling tangible personal property). Use tax is reported on Transaction Privilege, Use and Severance Tax Return, Form TPT-1.

The Arizona Department of Revenue collects the TPT for counties and most cities. Some of the larger cities in the state collect their privilege taxes separately. These are called non-program cities, and sales must be reported to those cities directly. So in the case of non-programed cities two TPT form must be reported and paid separately.

 

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