The Arizona (AZ) state sales tax rate is currently 5.6%. Depending on local municipalities, the total tax rate can be as high as 10.9%.
Arizona General Sales Tax Info
Sales tax is a tax paid to a governing body (state or local) for the sale of certain goods and services. First enacted in the United States in 1921, sales tax dates back to ancient Egyptian times where paintings depict the collection of tax on commodities. Arizona first adopted a general state transaction privilege tax in 1933. Since that time, the rate has risen to 5.6%.
As a business owner selling taxable goods or services, you act as an agent of the state of Arizona by collecting transaction privilege tax from purchasers and passing it along to the Department of Revenue. This is an important point worth emphasizing. Any transaction privilege tax collected from residents belongs to the Department of Revenue. As a business owner, it is your responsibility to manange the transaction privilege tax you collect to remain in compliance with state laws and avoid penalties and interest.
Streamlined Sales Tax
At this time, Arizona is not a Streamlined Sales Tax member.
Arizona is an origin-based state. Origin-based states are those where the transaction location is defined as the shipping location of the business rather than the customer delivery location. As a seller, this means you are responsible for applying the sales tax rate determined by the ship-from address on all taxable sales.
Nexus in Arizona
Establishing a substantial presence within a state is a concept known as “nexus” and is the deciding factor for whether the state governing body has the legal authority to require your business to collect transaction privilege tax. The two main principles most closely linked to nexus and sales tax (especially multistate sales tax) are the Due Process Clause of the 14th Amendment to the U.S. Constitution and the Commerce Clause, Article 1, Section 8 of the U.S. Constitution.
Nexus in Arizona can be triggered by a number of factors. The most common include having a physical location (office, warehouse, plant, etc.) within the state, having employees within the state, or conducting marketing activities within the state.
More recently, internet commerce has sparked debate over what can trigger nexus and where sales tax should be collected. For example, Fulfillment by Amazon merchants may find their products stored in Amazon warehouses across the country. This presence of physical goods in states triggers nexus and expands the complexity of managing your sales tax compliance. There are multiple Amazon warehouses located in Arizona. If you are enrolled in this service, be sure to understand where your products are being stored so you can apply for the appropriate state sales tax licenses and permits.
If you have any questions about whether your business has nexus in Arizona, we encourage you to reach out to Avalara Professional Services for a complete nexus review.
Registering for an Arizona Transaction Privilege Tax License
Prior to selling taxable goods or offering taxable services in Arizona, a business that has established nexus within the state is required to register for an Arizona Transaction Privilege Tax License.
Businesses may register for an Arizona Transaction Privilege Tax License online by visiting AZTaxes and following the instructions provided. The Arizona Department of Revenue recommends all new businesses register online. It’s fast, free, and more reliable than other options.
Register by Mail
Businesses may register for an Arizona Transaction Privilege Tax License by downloading, completing, and mailing the Joint Tax Application (Form JT-1) to the following address: License & Registration Section, Department of Revenue, PO Box 29032, Phoenix AZ 85038-9032
If you need assistance with completing the Arizona registration form, call (602)542-4576.
Register in Person
Business owners may register for a Arizona Transaction Privilege Tax License in person by visiting a local Arizona Department of Revenue office.
The cost to register for an Arizona Transaction Privilege Tax License is $12
Filing Transaction Privilege Tax in Arizona
After your business has started collecting Arizona transaction privilege tax, you’ll need to understand the process of filing state tax returns. Filing a transaction privilege tax return is the process of reporting the total amount of transaction privilege tax collected during a specific period (assigned based on the amount of sales tax you’ve collected in the prior year) to the Arizona Department of Revenue. It is a seperate step from remitting (paying) collected tax to the state governing body.
The Arizona Department of Revenue recommends all taxpayers filing transaction privilege tax file online. It’s faster, more reliable, and free.
To file your return online, visit AZTaxes and follow the instructions provided.
Filing by Mail
Taxpayers may also file Arizona sales tax returns by completing and mailing Form TPT-1: Transaction Privilege, Use, and Severance Tax Return to the following address: Arizona Department of Revenue, PO Box 29010, Phoenix, AZ 85038-9010
Zero Tax Filing
All businesses with active Arizona Transaction Privilege Tax Licenses are required to file on time returns regardless of whether any tax was collected. Failure to do so may result in penalty fees.
Filing Schedule and Due Dates
Based on the total transaction privilege tax collected, businesses are assigned a filing frequency. Of course, the government will always accept payments sooner than required so filers may accelerate payments if they choose.