Running a business in Arizona? This guide to the Arizona sales tax will help you understand their tax system and avoid paying penalties due to incorrect filings. Let’s get started.
Arizona Sales tax at a glance
Arizona sales tax rates & calculations in 2023
The Arizona sales tax rate in 2023 is between 5.6% and 11.2%. This comprises a base rate of 5.6% plus a mandatory local rate of up to 5.6%. Depending on the local sales tax jurisdiction, the total tax rate can be as high as 11.2%.
List of local sales tax rates in Arizona
You can look up the full table of sales tax rates in each city and county in Arizona. Here’s a snippet of the same.
FAQs
How do you calculate Arizona sales tax?
To calculate Arizona sales tax, you can use the following formula:
Sales tax = (base rate + local rate) * purchase price
For instance, with a base rate of 5.6%, a local rate of 3%, and a purchase price of $100, the sales tax would be 8.6% or $8.60.
What are the penalties for not paying Arizona sales tax?
Penalties for late filing or non-payment of Arizona sales tax include:
- 4.5% of the tax amount for failure to pay
- 0.5% of the tax due on the return per month
- Interest charges on unpaid tax
What’s the difference between destination-based and origin-based sales tax states?
The customer's location determines the tax rate in destination-based sales tax states. In origin-based states, the rate is determined by the seller's location.
Is the Arizona sales tax destination-based or origin-based?
Arizona is an origin-based sales tax state. Sellers collect tax based on where their business is located, not where the customer is.
Is Arizona a streamlined sales tax state?
Arizona is not a Streamlined Sales Tax State.
The Streamlined Sales Tax Project (SSTP) aims to simplify sales tax collection across states that adopt its Streamlined Sales and Use Tax Agreement (SSUTA), and Arizona has not joined the SSTP or implemented the SSUTA.
Sales tax nexus table in Arizona
FAQs
Do I need an Arizona seller's permit if I’m only a wholesaler?
Yes, wholesalers in Arizona need an Arizona transaction privilege tax (TPT) license, even if they only make sales for resale.
Do I need an Arizona seller's permit if I only sell temporarily in the state?
Even temporary sellers must register for an Arizona TPT license if they meet the sales tax nexus thresholds. This includes sellers at craft fairs, markets, and other temporary events.
What's taxable and what's exempt in Arizona
Exemptions from sales tax in Arizona
Some exemptions from Arizona sales tax include:
- Food for home consumption
- Prescription drugs and medical equipment
- Textbooks (for use by a public or private school student)
- Solar energy devices
FAQs
Are groceries taxable in Arizona?
Most groceries are exempt from sales tax in Arizona, including ingredients used for preparation and consumption at home. Prepared foods are taxable.
Is clothing taxable in Arizona?
Clothing and footwear are taxable in Arizona. There are no exemptions on these items.
Are digital products taxable in Arizona?
Yes, digital products like music, movies, ebooks, and software are taxable in Arizona as they are considered tangible property according to Arizona state laws.
Is software-as-a-service (SaaS) taxable in Arizona?
Yes, Arizona considers SaaS taxable as it is regarded as a digital product and a tangible personal property.
Are services taxable in Arizona?
Most services are not taxable in Arizona. However, some services like contracting, maintenance, and repair are taxable.
Excise taxes in Arizona
Arizona has excise taxes on:
- Alcoholic beverages
- Tobacco and vaping products
- Motor vehicle fuel
- Aviation fuel
- Severance (mining)
Alcohol tax in Arizona
Arizona does not have a general sales tax on food and beverages. However, there are excise taxes on some specific items:
- Liquor: $3.00 per gallon
- Beer: $0.16 per gallon
- Wine: $0.84 per gallon
Remote sellers in Arizona
Many states now require out-of-state online sellers to collect sales tax if they exceed certain sales or transaction thresholds.
Out-of-state sellers with no physical presence can still have economic nexus based on the sales threshold. Remote sellers meeting the Arizona economic nexus threshold must register and collect Arizona sales tax.
After the South Dakota v. Wayfair ruling, sellers with over $100,000 in sales or 200 transactions to South Dakota customers must collect sales tax, affecting many other tax-collecting states.
Prepaid sales tax rates for fuel products in Arizona
Arizona has prepaid sales tax rates on motor vehicles, aviation, and jet fuel. The rates vary by product and are adjusted periodically.
Discretionary taxes in Arizona (local sales taxes)
Cities and counties in Arizona can impose local transaction privilege taxes on top of the state sales tax. Depending on the jurisdiction, local sales tax rates range from 0% to 5.6%.
Collecting sales tax in Arizona
Let’s look at the steps to collect sales tax in Arizona now.
How to collect sales tax in Arizona if you are not based in Arizona (Out-of-State)
Even if you do not have a physical presence in Arizona, you must register with the Arizona Department of Revenue (AZDOR) if you meet the economic nexus threshold for sales into the state.
Out-of-state sellers who exceed $100,000 in gross revenue from Arizona sales are considered to have economic nexus and must collect Arizona sales tax.
You can voluntarily register to collect and pay Arizona sales tax even below the economic nexus threshold for your Arizona customers.
There are two main ways to establish a sales tax nexus in Arizona:
- Having physical presence such as an office, warehouse, employees, etc. in Arizona.
- Exceeding the $100,000 economic nexus threshold for gross revenue from Arizona sales.
Specific rules apply for marketplace facilitators like Amazon and Etsy and delivery network companies like Uber Eats and Grubhub.
Register for a Transaction Privilege Tax (TPT) license online through the AZDOR website. Once you obtain the TPT license in Arizona, you can legally do business in the state. You must begin collecting and remitting sales tax on Arizona sales even if you’re not physically based in Arizona.
Should you collect sales tax on shipping charges in Arizona?
If shipping charges are separately stated on the invoice, they are generally exempt from Arizona sales tax. However, handling charges are always taxable in Arizona.
If shipping charges are bundled into the overall sales price rather than separately stated, they are considered part of the taxable sale and subject to Arizona sales tax.
Filing and paying sales taxes in Arizona
To file and pay Arizona sales tax, you must submit a Transaction Privilege Tax (TPT) return and remit any taxes owed to the Arizona Department of Revenue (AZDOR). This can be done online through the AZTaxes.gov portal or by mail.
When filing your Arizona TPT return, you will report your total taxable sales and calculate the sales tax due. Payment must be made electronically or sent along with your mailed tax return.
Sales tax return filing schedule and due dates in Arizona
The AZDOR assigns a filing frequency to businesses based on their anticipated taxable sales. This schedule is either monthly, quarterly or annually.
The following due dates apply to Arizona TPT returns:
Monthly:
Quarterly:
Annual:
Filing penalties in Arizona
Businesses that fail to file their TPT returns on time may be penalized. The penalties are based on the amount of tax due and the number of days late.
For late or incorrect tax filings, the state charges a 4.5% penalty on the amount of tax owed, up to a maximum of 25% of the tax amount.
When are returns due in Arizona?
The due date for filing TPT returns in Arizona is the last day of the month following the period end date.
For example, if you file quarterly and the filing period ends on March 31, your return filing due date will be April 30.
Similarly, for yearly filing, which ends on December 31, you can file your taxes by January 31.
FAQs
What are the Arizona sales tax due dates?
Arizona sales tax due dates vary based on filing frequency. For monthly filers, returns are expected by the end of the following month. Quarterly filers have returns due on April 30, July 31, October 31, and January 31. Annual filers must file by February 28 for the previous calendar year.
I didn’t collect any Arizona sales tax during this period. Do I still need to file a return?
You still need to file a $0 TPT return in Arizona, even if you didn't collect any sales tax. Failing to file a return can result in late filing penalties.
Can I get an extension on filing my Arizona sales tax return?
You can request a 60-day extension to file your Arizona TPT return by submitting form TPT-EX before the original due date. However, any taxes owed must still be paid on time to avoid late payment penalties.
Can I amend an Arizona sales tax return?
You can file an amended TPT return in Arizona to correct errors or omissions from a previous return. When amending a return, you may owe additional tax, interest, or penalties.
Audit & appeals process in Arizona
The audit & appeals process is a series of steps a business must go through if audited by the Arizona Department of Revenue (AZDOR). The process begins with the auditor contacting the company to schedule an audit.
The auditor will then review the business's records and tax returns to determine if sales tax was not paid. If the auditor finds any discrepancies, they will report their findings.
The business then has the opportunity to appeal the findings. The business can appeal to the Arizona Tax Court if the appeal is denied.
Arizona sales tax audit process
The Arizona sales tax audit process is as follows:
- The AZDOR notifies the taxpayer that their business has been selected for an audit.
- The auditor requests records, books, and other information from the taxpayer.
- The auditor reviews the taxpayer's records and identifies any discrepancies.
- The auditor issues their audit report with any additional tax assessments.
- The taxpayer can agree or disagree with the audit findings.
- If the taxpayer disagrees, they can file an administrative appeal.
- If the appeal is unsuccessful, the taxpayer can further appeal to the Arizona Tax Court.
What to expect during the audit?
During an Arizona sales tax audit, the auditor will review your books, records, bank statements, and tax returns. They will likely want to see sales invoices, purchase records, and exemption certificates. You may also be asked to explain your accounting methods.
After the audit – Appealing the results
If you disagree with the audit findings, you can file an appeal with the AZDOR within 45 days. Contesting audit findings helps you avoid paying inaccurate tax assessments, penalties, and interest.
Sales tax registration in Arizona
Here are the steps for registering for sales tax in Arizona:
How to register for sales tax in Arizona
To register for sales tax in Arizona, you can apply online at the Arizona Department of Revenue (AZDOR) website. You will need to provide:
- Your business name, address, and contact details
- Your EIN or SSN
- Your business start date
- Your business activities
- Your projected monthly sales
Once registered, you must collect and remit Arizona sales tax on taxable sales. You can use sales tax software or file returns manually.
Registration requirements for online sellers in Arizona
Online sellers must register for an Arizona TPT license if:
- You exceed $200,000 in gross revenue from Arizona sales in the current or prior calendar year.
- You have inventory stored in Arizona fulfillment centers.
- You have click-through nexus via Arizona-based affiliates.
Cost of registration for an Arizona sales tax license
Registering for an Arizona TPT license costs $50 for regular filing and $85 for expedited processing. You may also need to register with local cities.
More Information & Contacts for Arizona Sales Tax
For sales tax filing and appeals in Arizona, contact:
- Arizona Department of Revenue
- Phone number: 602-255-3381
- Website: https://azdor.gov/
There you have it—a comprehensive guide on Arizona's sales tax regime. Need help filing taxes for your ecommerce store? Get a demo with Numeral now.
Arizona Sales tax at a glance
Arizona sales tax rates & calculations in 2023
The Arizona sales tax rate in 2023 is between 5.6% and 11.2%. This comprises a base rate of 5.6% plus a mandatory local rate of up to 5.6%. Depending on the local sales tax jurisdiction, the total tax rate can be as high as 11.2%.
List of local sales tax rates in Arizona
You can look up the full table of sales tax rates in each city and county in Arizona. Here’s a snippet of the same.
FAQs
How do you calculate Arizona sales tax?
To calculate Arizona sales tax, you can use the following formula:
Sales tax = (base rate + local rate) * purchase price
For instance, with a base rate of 5.6%, a local rate of 3%, and a purchase price of $100, the sales tax would be 8.6% or $8.60.
What are the penalties for not paying Arizona sales tax?
Penalties for late filing or non-payment of Arizona sales tax include:
- 4.5% of the tax amount for failure to pay
- 0.5% of the tax due on the return per month
- Interest charges on unpaid tax
What’s the difference between destination-based and origin-based sales tax states?
The customer's location determines the tax rate in destination-based sales tax states. In origin-based states, the rate is determined by the seller's location.
Is the Arizona sales tax destination-based or origin-based?
Arizona is an origin-based sales tax state. Sellers collect tax based on where their business is located, not where the customer is.
Is Arizona a streamlined sales tax state?
Arizona is not a Streamlined Sales Tax State.
The Streamlined Sales Tax Project (SSTP) aims to simplify sales tax collection across states that adopt its Streamlined Sales and Use Tax Agreement (SSUTA), and Arizona has not joined the SSTP or implemented the SSUTA.
Sales tax nexus table in Arizona
FAQs
Do I need an Arizona seller's permit if I’m only a wholesaler?
Yes, wholesalers in Arizona need an Arizona transaction privilege tax (TPT) license, even if they only make sales for resale.
Do I need an Arizona seller's permit if I only sell temporarily in the state?
Even temporary sellers must register for an Arizona TPT license if they meet the sales tax nexus thresholds. This includes sellers at craft fairs, markets, and other temporary events.
What's taxable and what's exempt in Arizona
Exemptions from sales tax in Arizona
Some exemptions from Arizona sales tax include:
- Food for home consumption
- Prescription drugs and medical equipment
- Textbooks (for use by a public or private school student)
- Solar energy devices
FAQs
Are groceries taxable in Arizona?
Most groceries are exempt from sales tax in Arizona, including ingredients used for preparation and consumption at home. Prepared foods are taxable.
Is clothing taxable in Arizona?
Clothing and footwear are taxable in Arizona. There are no exemptions on these items.
Are digital products taxable in Arizona?
Yes, digital products like music, movies, ebooks, and software are taxable in Arizona as they are considered tangible property according to Arizona state laws.
Is software-as-a-service (SaaS) taxable in Arizona?
Yes, Arizona considers SaaS taxable as it is regarded as a digital product and a tangible personal property.
Are services taxable in Arizona?
Most services are not taxable in Arizona. However, some services like contracting, maintenance, and repair are taxable.
Excise taxes in Arizona
Arizona has excise taxes on:
- Alcoholic beverages
- Tobacco and vaping products
- Motor vehicle fuel
- Aviation fuel
- Severance (mining)
Alcohol tax in Arizona
Arizona does not have a general sales tax on food and beverages. However, there are excise taxes on some specific items:
- Liquor: $3.00 per gallon
- Beer: $0.16 per gallon
- Wine: $0.84 per gallon
Remote sellers in Arizona
Many states now require out-of-state online sellers to collect sales tax if they exceed certain sales or transaction thresholds.
Out-of-state sellers with no physical presence can still have economic nexus based on the sales threshold. Remote sellers meeting the Arizona economic nexus threshold must register and collect Arizona sales tax.
After the South Dakota v. Wayfair ruling, sellers with over $100,000 in sales or 200 transactions to South Dakota customers must collect sales tax, affecting many other tax-collecting states.
Prepaid sales tax rates for fuel products in Arizona
Arizona has prepaid sales tax rates on motor vehicles, aviation, and jet fuel. The rates vary by product and are adjusted periodically.
Discretionary taxes in Arizona (local sales taxes)
Cities and counties in Arizona can impose local transaction privilege taxes on top of the state sales tax. Depending on the jurisdiction, local sales tax rates range from 0% to 5.6%.
Collecting sales tax in Arizona
Let’s look at the steps to collect sales tax in Arizona now.
How to collect sales tax in Arizona if you are not based in Arizona (Out-of-State)
Even if you do not have a physical presence in Arizona, you must register with the Arizona Department of Revenue (AZDOR) if you meet the economic nexus threshold for sales into the state.
Out-of-state sellers who exceed $100,000 in gross revenue from Arizona sales are considered to have economic nexus and must collect Arizona sales tax.
You can voluntarily register to collect and pay Arizona sales tax even below the economic nexus threshold for your Arizona customers.
There are two main ways to establish a sales tax nexus in Arizona:
- Having physical presence such as an office, warehouse, employees, etc. in Arizona.
- Exceeding the $100,000 economic nexus threshold for gross revenue from Arizona sales.
Specific rules apply for marketplace facilitators like Amazon and Etsy and delivery network companies like Uber Eats and Grubhub.
Register for a Transaction Privilege Tax (TPT) license online through the AZDOR website. Once you obtain the TPT license in Arizona, you can legally do business in the state. You must begin collecting and remitting sales tax on Arizona sales even if you’re not physically based in Arizona.
Should you collect sales tax on shipping charges in Arizona?
If shipping charges are separately stated on the invoice, they are generally exempt from Arizona sales tax. However, handling charges are always taxable in Arizona.
If shipping charges are bundled into the overall sales price rather than separately stated, they are considered part of the taxable sale and subject to Arizona sales tax.
Filing and paying sales taxes in Arizona
To file and pay Arizona sales tax, you must submit a Transaction Privilege Tax (TPT) return and remit any taxes owed to the Arizona Department of Revenue (AZDOR). This can be done online through the AZTaxes.gov portal or by mail.
When filing your Arizona TPT return, you will report your total taxable sales and calculate the sales tax due. Payment must be made electronically or sent along with your mailed tax return.
Sales tax return filing schedule and due dates in Arizona
The AZDOR assigns a filing frequency to businesses based on their anticipated taxable sales. This schedule is either monthly, quarterly or annually.
The following due dates apply to Arizona TPT returns:
Monthly:
Quarterly:
Annual:
Filing penalties in Arizona
Businesses that fail to file their TPT returns on time may be penalized. The penalties are based on the amount of tax due and the number of days late.
For late or incorrect tax filings, the state charges a 4.5% penalty on the amount of tax owed, up to a maximum of 25% of the tax amount.
When are returns due in Arizona?
The due date for filing TPT returns in Arizona is the last day of the month following the period end date.
For example, if you file quarterly and the filing period ends on March 31, your return filing due date will be April 30.
Similarly, for yearly filing, which ends on December 31, you can file your taxes by January 31.
FAQs
What are the Arizona sales tax due dates?
Arizona sales tax due dates vary based on filing frequency. For monthly filers, returns are expected by the end of the following month. Quarterly filers have returns due on April 30, July 31, October 31, and January 31. Annual filers must file by February 28 for the previous calendar year.
I didn’t collect any Arizona sales tax during this period. Do I still need to file a return?
You still need to file a $0 TPT return in Arizona, even if you didn't collect any sales tax. Failing to file a return can result in late filing penalties.
Can I get an extension on filing my Arizona sales tax return?
You can request a 60-day extension to file your Arizona TPT return by submitting form TPT-EX before the original due date. However, any taxes owed must still be paid on time to avoid late payment penalties.
Can I amend an Arizona sales tax return?
You can file an amended TPT return in Arizona to correct errors or omissions from a previous return. When amending a return, you may owe additional tax, interest, or penalties.
Audit & appeals process in Arizona
The audit & appeals process is a series of steps a business must go through if audited by the Arizona Department of Revenue (AZDOR). The process begins with the auditor contacting the company to schedule an audit.
The auditor will then review the business's records and tax returns to determine if sales tax was not paid. If the auditor finds any discrepancies, they will report their findings.
The business then has the opportunity to appeal the findings. The business can appeal to the Arizona Tax Court if the appeal is denied.
Arizona sales tax audit process
The Arizona sales tax audit process is as follows:
- The AZDOR notifies the taxpayer that their business has been selected for an audit.
- The auditor requests records, books, and other information from the taxpayer.
- The auditor reviews the taxpayer's records and identifies any discrepancies.
- The auditor issues their audit report with any additional tax assessments.
- The taxpayer can agree or disagree with the audit findings.
- If the taxpayer disagrees, they can file an administrative appeal.
- If the appeal is unsuccessful, the taxpayer can further appeal to the Arizona Tax Court.
What to expect during the audit?
During an Arizona sales tax audit, the auditor will review your books, records, bank statements, and tax returns. They will likely want to see sales invoices, purchase records, and exemption certificates. You may also be asked to explain your accounting methods.
After the audit – Appealing the results
If you disagree with the audit findings, you can file an appeal with the AZDOR within 45 days. Contesting audit findings helps you avoid paying inaccurate tax assessments, penalties, and interest.
Sales tax registration in Arizona
Here are the steps for registering for sales tax in Arizona:
How to register for sales tax in Arizona
To register for sales tax in Arizona, you can apply online at the Arizona Department of Revenue (AZDOR) website. You will need to provide:
- Your business name, address, and contact details
- Your EIN or SSN
- Your business start date
- Your business activities
- Your projected monthly sales
Once registered, you must collect and remit Arizona sales tax on taxable sales. You can use sales tax software or file returns manually.
Registration requirements for online sellers in Arizona
Online sellers must register for an Arizona TPT license if:
- You exceed $200,000 in gross revenue from Arizona sales in the current or prior calendar year.
- You have inventory stored in Arizona fulfillment centers.
- You have click-through nexus via Arizona-based affiliates.
Cost of registration for an Arizona sales tax license
Registering for an Arizona TPT license costs $50 for regular filing and $85 for expedited processing. You may also need to register with local cities.
More Information & Contacts for Arizona Sales Tax
For sales tax filing and appeals in Arizona, contact:
- Arizona Department of Revenue
- Phone number: 602-255-3381
- Website: https://azdor.gov/
There you have it—a comprehensive guide on Arizona's sales tax regime. Need help filing taxes for your ecommerce store? Get a demo with Numeral now.
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About the author
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Deb Mukherjee
Deb is the head of marketing at Numeral. He has worked with the likes of Shopify and Wonderment and has helped countless ecommerce stores scale through seamlessly. With a background in finance, he often finds himself advising stores on sales tax and good financial systems.
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