Last Updated on August 27, 2020
Most businesses starting in Arizona will need to register for a Transaction Privilege Tax license (TPT). This is commonly referred to as a seller’s permit, sales tax license, sales tax number or sales tax registration. A business selling a product or offering certain services in Arizona will need to register. While the Transaction Privilege Tax isn’t a sales tax, it is a tax on vendors for the privilege of doing business in the state that gets passed down to the customer.
The Transaction Privilege Tax license is obtained when applying for the Arizona Joint Tax Application (JT-1) from the Arizona Department of Revenue (ADOR). This application is used with both the Department of Revenue and Arizona Department of Economic Security to simplify the registration process for businesses. In addition to the TPT, the JT-1 allows businesses to register for Use Tax, Employer Withholding and Unemployment Insurance.
Check out the rest of this guide to find out who needs a Transaction Privilege Tax, what products and services are taxable, how to register for a permit and reporting requirements.
Who needs a Transaction Privilege License in Arizona?
A business must register for a TPT license in Arizona when:
- A business has “nexus” (significant presence in the state) such as a retail store, office or warehouse where products are produced, stored and/or delivered
- An employee or independent contractor is operating in the state for more than 2 days out of the year
- Selling items at craft shows, fairs, seminars, conventions, etc.
- An online business located in Arizona is selling to Arizona residents
- An out-of-state business selling to over $200,000 in taxable products to Arizona residents. This amount reduces to $150,000 in 2020 and $100,000 in 2021)
Taxpayers conducting a special event, swap meet or arts and crafts show may need to register for a license.
More information on Transaction Privilege Taxes is available in the Guide to Taxes for Arizona Businesses (Publication 622)
What products and services are taxable in Arizona?
There are a few exceptions, but almost all physical products are taxable when sold at retail in Arizona. Common examples include:
- General merchandise like furniture, appliances, and clothing
- Titled or registered items like vehicles
Qualifying food, prescriptions, medical appliances, and some machinery isn’t taxable.
Labor in most cases isn’t taxable in Arizona. For instance, let’s say you broke the screen to your cell phone and take it to a cell phone repair shop to have it fixed. Tax would be added to the selling price of the new screen and any additional parts to fix the phone. The labor to replace the screen isn’t taxable. However, a business that makes furniture will indirectly have tax on labor. In this instance, let’s say this business is building a dining room table for a customer. Through labor, the pieces of wood are shaped, sanded and painted to build this piece of furniture. While the labor isn’t directly taxable, tax is charged to the final selling price of the table.
Digital products and services are taxable in Arizona.
Most services aren’t taxable in Arizona, however there are a few exceptions.
- Short-term lodging
- Job printing
How to register for a Transaction Privilege Tax License in Arizona
The Transaction Privilege Tax license can be obtained by registering through AZTaxes.gov, by mailing in the Joint Tax Application (JT-1) or submitting the JT-1 form in-person at a Department of Revenue office.
1600 W. Monroe
Phoenix, AZ 85007
55 N. Center
Mesa, AZ 85201
400 W. Congress
Tucson, AZ 85701
Information needed to register includes:
- Type of business entity (Sole Proprietorship, Partnership, Corporation, LLC)
- Legal business name
- Names and addresses of owners/officers/members
- Phone number
- Physical address of the business
- North American Industry Classification System (NAICS) code
- Federal Employer Identification Number (FEIN), or SSN if a sole proprietorship with no employees
- Date business activities began or will begin
- Projected monthly sales
- Projected monthly taxable sales
- Employee information
In addition to the Department of Revenue TPT license, a business must also register for TPT licensing in each of the cities they operate in.
How much does a Transaction Privilege Tax License cost in Arizona?
The Transaction Privilege Tax is $12 per Arizona location. A business can opt to report for each location separately or have a consolidated license.
In addition to the state fee, a business will also need to file for a sales tax permit in each city where they do business. This permit varies between city but ranges between $0 and $50. See the full table of TPT license fees by city.
Out-of-state online sellers must register in each state where they sell a product.
How long does it take to get an Arizona Transaction Privilege Tax?
Regardless of whether applying online or by mail, expect 3-5 business days to receive a TPT License.
Do you have to renew your Arizona Transaction Privilege Tax?
Transaction Privilege Tax Licenses have to be renewed by January 1 each year.
Sales tax reporting
How is sales tax collected?
When a business makes a sale of a taxable product or service, the business charges the appropriate tax rate to the customer. This tax is collected by the business who then sends it to the Arizona Department of Revenue.
How much sales tax is charged?
The sales tax rate that is charged varies depending on the address of the business if the purchase is made or shipped from a business located in the state. If the seller is based out of the state, the sales tax rate is based on the buyer’s address.
In addition to the statewide tax, there are additional sales taxes that may be added by cities and municipalities. The Arizona Department of Revenue has a Tax Rate Table to determine how much sales tax to charge.
When are Arizona sales tax returns due?
The Department of Revenue will determine a filing frequency based on the expected volume of annual sales, which will be monthly, quarterly or annually. Generally, a business selling over $8,000 annually in taxable sales will file monthly. The frequency is re-evaluated annually.
Filings are due the 20th day of the month following the reporting period, unless the 20th falls on a weekend or federal holiday, in which case would move to the next business day.
Even if the business had no sales during the reporting period, a TPT filing is still required.
Sales tax on purchases for resale
A business is able to purchase items to resell without paying the Transaction Privilege Tax. TPT liability is passed from the distributor to the retailer who will then charge tax to the final customer.
Wholesalers and distributors will require a sales tax number and a completed Arizona Resale Certificate to document the items being purchased are for resale.
If you have questions about the Transaction Privilege Tax, the Arizona Department of Revenue can be contacted by calling 602-255-3381.