Updated February 2021
Arizona is a little different than other states when it comes to sales tax. First of all, they don’t even have a sales tax. They have a transaction privilege tax (TPT), which is like a sales tax but with the onus to pay on the seller. (You can read all about Arizona transaction privilege tax here.)
Another odd thing about Arizona state tax is that online sellers are required under the Model Cities Tax Code to register for a sales tax permit in each city into which they make a sale. And this registration can cost anywhere from free to up to $50 per city. This once again proves that Arizona is one of the trickiest, most costly and most difficult states in which to collect tax.
Here’s an example Arizona individual city registration scenario that an online seller might face:
Jess is an online seller and sells her products to buyers located in the cities of Phoenix, Mesa and Hayden, Arizona. When Jess goes to remit the sales tax she collected on Arizona’s state sales tax filing website, she will be automatically registered with each of these three cities. Arizona will then bill her for the cost of the sales tax registration. It costs $50 to register in Phoenix, $20 to register in Mesa and $5 to register in Hayden. This means that not only is Jess paying her Arizona transaction privilege tax (TPT), she also owes a total of $75 to register for TPT permits in these individual Arizona cities.
What does this mean for online seller with nexus in Arizona?
As you make sales into new cities, the Arizona Department of Revenue will automatically register you for sales tax permits in each city. You may find yourself paying a fee for one or more individual city sales tax registrations each time you file an Arizona transaction privilege tax (TPT) return. Is this bananas? Yes. But, unfortunately, Arizona law requires this.
Under Arizona legislation as of 2019, municipal license fees are waived for both remote sellers and online marketplace facilitators. Remote sellers are typically exempt from municipal license/registration fees in Arizona. Thus, if your sales tax account is billed for any of these fees — and you are a remote seller — we suggest reaching out directly out the state to ensure you are assigned the correct license type in Arizona, as well as if you – as a remote seller, are exempt from these fees, which can result in the removal of these registration fees from your account.
How much does it cost to register for TPT in each individual Arizona city?
Home Rule City?
Do you have questions or comments about the strange and expensive way that Arizona require online sellers to collect transaction privilege tax? Start the conversation in the comments.