“The sales tax for businesses in Arizona is 5.6%”
What Does The Arizona Sales Tax For Businesses Mean?
It is a fee imposed on the sale of specific goods and services by a government agency (local or state). The sales tax was first adopted in the United States in 1921, but it may be traced back to ancient Egypt, where paintings illustrate the collecting of taxes on goods. The state of Arizona became the first to enact a general state transaction privilege tax in 1933. The percentage has increased to 5.6 percent since then.
By collecting transaction privilege tax from customers and remitting it to the Department of Revenue whenever you sell taxable goods or services, you are acting as an agent of the state of Arizona. This is a crucial point that should be highlighted. Resident transaction privilege taxes are the property of the State Department of Revenue. To stay in compliance with state rules and prevent penalties and interest, it is your obligation as a business owner to manage the transaction privilege tax you collect.
How Much Is The Sales Tax For Businesses In Arizona?
Arizona has a 5.6 percent state sales tax and allows local governments to collect a 5.3 percent local choice sales tax. There are 80 local tax jurisdictions in the state, collecting an average of 2.403 percent in local taxes.
The city of Tucson has the highest sales tax rate in Arizona, at 11.1 percent when combined with the state sales tax.
| Arizona Business Sales Tax | Threshold Limit |
| 5.6% | $100,000 economic sales threshold limit |
Do You Need To Collect Arizona Sales Tax Dor Your Ecommerce Business?
If you have a nexus in Arizona, you must collect sales tax. There are two ways that sellers can be physically linked to a state: economically or physically. Having a physical presence or activity in a state to justify paying sales tax there is known as physical nexus. The term “economic nexus” refers to exceeding a state’s economic threshold for total income or transaction volume.
You’ve probably heard of transaction privilege tax if you do business in Arizona (TPT). Vendors in Arizona are charged a transaction privilege tax (TPT) in exchange for conducting business in the state. It is usually referred to as a sales tax. This tax is Arizona’s equivalent of a sales and use tax, and it works in the same way as sales and use taxes in other states.
Therefore, this is what the Arizona sales tax for businesses is all about. Now the question arises: what types of goods and services are taxable under Arizona sales tax? Let’s see.
Read More: Alaska Sales Tax For Businesses 2022: A Complete Guide
What Types of Goods and Services Are Taxable Under Arizona Sales Tax?
The first step in sales tax compliance is determining if the products or services your company sells are taxable in Arizona.
- Traditional Goods or Services
In Arizona, sales tax applies to purchases of tangible goods such as furniture, household appliances, and automobiles.
Groceries, prescription drugs, and gasoline are all exempt from sales tax in Arizona.
- Digital Goods or Services
Any electronically delivered good or services, such as music downloaded from iTunes or a video or e-book purchased from Amazon, are referred to as a digital offering.
Businesses in Arizona are required to collect sales tax at the normal rate on the sale of digital products and services.
Therefore, if you are dealing in any of these goods and services, you are subject to pay sales tax in Arizona. Now let’s move on to see the tax collection and tax filing procedure in Arizona.
Tax Collection
When you receive your seller’s permit and start your business, you will need to determine how much sales tax to charge different clients. It’s important for business owners to collect the correct sales tax rate to avoid fines and costly audits.
You must account for the following types of purchases when calculating sales tax:
- Store Sales- Retailers selling goods or services on-site can calculate sales tax by using the rate determined by the store’s location.
- In-State Shipping- When delivering to Arizona clients, your tax rate is determined by the county and city tax districts that your company and your customer share.
- Out of state Sales- Only businesses with nexus in other states are required to pay sales tax on out-of-state sales. The legal word for a company’s actual presence in a state is nexus.
Tax Filing
You’re ready to file your sales tax return now that you’ve applied for your Arizona seller’s permit and learned how to charge the correct amount of sales tax to all of your customers. Make sure you meet all filing deadlines to avoid penalties and fines.
Businesses in Arizona are required to file sales tax returns and make payments online.
How often do you need to file the Arizona sales tax?
In order to file sales taxes, your company must earn a certain amount of sales tax. New firms can choose to file monthly or quarterly, depending on their expected yearly revenue for the first 12 months of operation.
- Annual filing- If your company receives less than $2000 in sales tax per year, you should file annual returns.
- Quarterly filing- If you collect between $2000 and $8000 in sales tax each year, you should file quarterly returns.
- Monthly filing- If your company collects more than $8000 in sales tax each year, you must file returns on a monthly basis.
What Happens If You Fail To File The Tax Return Before The Due Date?
Filing Deadline
The deadline for all Arizona sales tax returns is the 20th of the month unless it is a weekend or federal holiday, in which case it is postponed to the next working day.
Penalties
Late filing penalties in Arizona are 4.5 percent per month or partial month, up to a maximum of 25% of the tax stated on the tax return. If only a portion of the tax is paid, the penalty still applies to the entire tax without any deductions.
Arizona additionally imposes a late payment penalty of 0.5 percent each month, up to a maximum of 10% of the unpaid tax. When combined with the previous penalty, the total payment of the two fines cannot exceed 25% of the tax payable.
Need Assistance With Arizona Sales Tax
Our company, Freecashflow.io, provides accounting and tax services to eCommerce businesses. Along with multibillion-dollar corporations, we have worked with Warner Brothers, Ernst & Young, and Paramount Pictures. Tax and accounting issues can be handled by us. Feel free to contact us if you have any questions.
