If you’re selling digital services and products to customers in Arizona, then you might be liable for Arizona’s sales tax. This guide covers two very important parts of the system:
- Registering for the tax, and then
- Filing tax returns on time.
We’ve scoured the Arizona Department of Revenue website to provide you with all the necessary information about sales tax for businesses in one place.
Does Arizona have sales tax?
Arizona doesn’t have a “sales tax” – it has what’s called a “transaction privilege tax” or TPT. But it functions basically like a standard US sales tax.
Here’s a brief explanation from the Department of Revenue website:
“Arizona transaction privilege tax (TPT) differs from the sales tax imposed by most states. It is a tax on the privilege of conducting business in the State of Arizona. Unlike a true sales tax, the TPT is levied on income derived by the seller that is legally allowed to pass the tax burden on to the purchaser.”
How to register for sales tax in Arizona
With that in mind, this is how to register for TPT in Arizona. The first step is to register your business for a TPT license using the AZTaxes online service.
Be prepared to share the following information:
- Your social security number or visa number
- Your date of birth
- Your driver license number, state ID number, or other ID (e.g., passport, military ID)
- Names and location of banks where you have an account
- Names and addresses of suppliers
- Name and address of bookkeeper or accountant
- Name and address of personal references
- Expected average monthly sales and the amount of those sales which are taxable
- Your email address
- If you’ve purchased an existing business, you must also provide the previous permit information
Register for a TPT license
- Go to AZTaxes.gov and create a new user account by entering some basic information.
- Log into AZTaxes.gov and click ‘Business Registration.’
- Complete an Arizona Remote Seller/Out-of-State Marketplace Facilitator Tax Application by clicking ‘Register New Business Remote Seller/Out-of-State Marketplace Facilitator.’
- Complete the fields and indicate that you’re a remote seller in the ‘License Type’ section of the application.
- Once submitted, you’ll receive a confirmation number and your application will begin processing.
- Once your registration is complete, there’s one more verification process! Simply use this step-by-step guide to verify your TPT license type.
For remote sellers or out-of-state marketplace facilitators, the cost of a TPT license is $12. It’s valid for the calendar year in which it’s issued and can be renewed for free in the following years.
As for the application, the AZ website doesn’t state how long you should expect to wait, but if you have any questions, you can email the tax office at AZTaxHelp@azdor.gov.
After your application is reviewed and approved, you should receive a TPT License ID number. You’ll also be assigned a tax filing frequency: monthly, quarterly, or yearly.
How to file sales tax returns in Arizona
TPT should be reported and filed using US dollars. If you’ve made any transactions in Arizona in a different currency, be sure to convert those to USD using official currency exchange rates.
When to file and pay
As a remote seller, your very first TPT filing will occur in the month following 30 days from when you hit the economic threshold. For example, if you met the threshold on February 15, then your first tax return will be due in April. Then it continues for the rest of the calendar year!
For monthly filers, reports are due on the 20th day of the month following the reporting month. For example, the July sales tax report is due August 20.
For quarterly filers, reports are due on the 20th day of the month following the reporting period.
- April 20, for first quarter ending March 31
- July 20, for second quarter ending June 30
- October 20, for third quarter ending September 30
- January 20, for fourth quarter ending December 31
For yearly filers, reports for the previous year are due on January 20.
Note: Didn’t make any sales in Arizona during your reporting period? You should still report that. This is often called a “zero return” and it follows the exact same process as a normal return. (Just a little less data entry 😉)
If, in the following calendar year, your sales do not meet Arizona’s economic threshold, you may choose to cancel your TPT license (and avoid sales tax obligations) until you meet the threshold again. If and when you do, you should contact the E-Commerce Compliance and Outreach (ECCO) team to reinstate your previous license.
How to file
Before you get started, you should collect all the information about your taxable sales in Arizona during the previous quarter. The tax website suggests having these pieces ready:
- Total sales and income
- Total purchases and expenses
Note: If you sell your products through a marketplace facilitator (which you don’t operate yourself), you will report sales made through the marketplace and then take a deduction for the amount of such sales (using deduction code 804).
You also need to get an exemption certificate from the marketplace facilitator. The request form for the Arizona remote seller exemption certificate is here. Then the marketplace facilitator will report and remit that portion of TPT on your behalf!
How to pay
Tax payments must be in US dollars, and can be made directly at the time of filing.
Payment options include:
- Credit card
- ACH Debit
Once complete, you’ll see a payment confirmation page with a confirmation number.
What the AZ sales tax rate is
The sales tax rate in Arizona is 5.6%. But there are also local level taxes you should look out for, depending on the counties and cities where you’re selling.
Now that you’re registered, you must comply with all the rules for Arizona sales tax! To learn more about these rules and how to stay compliant as a remote seller, check out our Business Guide to Sales Tax in Arizona
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the Tax Agency.