A comprehensive overview of Arizona's sales tax landscape, covering compliance, rates, and regulations for businesses.
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The Arizona sales tax rate 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%.
You can look up the current sales tax rates in each city and county in Arizona. Here’s a snippet of the same.
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.
Penalties for late filing or non-payment of Arizona sales tax include:
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.
Arizona is an origin-based sales tax state. Sellers collect tax based on where their business is located, not where the customer is.
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.
Yes, wholesalers in Arizona need an Arizona transaction privilege tax (TPT) license, even if they only make sales for resale.
Even temporary sellers must register for an Arizona TPT license if they meet the Arizona tax nexus thresholds. This includes sellers at craft fairs, markets, and other temporary events.
Some exemptions from Arizona sales tax include:
Most groceries are exempt from sales tax in Arizona, including ingredients used for preparation and consumption at home. Prepared foods are taxable.
Clothing and footwear are taxable in Arizona. There are no exemptions on these items.
Yes, digital products like music, movies, ebooks, and software are taxable in Arizona as they are considered tangible property according to Arizona state laws.
Yes, Arizona considers SaaS taxable as it is regarded as a digital product and a tangible personal property.
Most services are not taxable in Arizona. However, some services like contracting, maintenance, and repair are taxable.
Arizona has excise taxes on:
Arizona does not have a general sales tax on food and beverages. However, there are excise taxes on some specific items:
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.
Arizona has prepaid sales tax rates on motor vehicles, aviation, and jet fuel. The rates vary by product and are adjusted periodically.
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%.
Let’s look at the steps to collect sales tax in Arizona now.
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:
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
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.
The Arizona sales tax audit process is as follows:
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.
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.
Here are the steps for registering 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:
Once registered, you must collect and remit Arizona sales tax on taxable sales. You can use sales tax software or file returns manually.
Online sellers must register for an Arizona TPT license if:
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.
For sales tax filing and appeals in Arizona, contact:
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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