As an e-commerce seller, you will need to collect sales tax in Arizona if you have:
(1) Gross sales that exceed $100,000 in the current or previous calendar year (economic nexus), or
(2) Physical presence in Arizona (physical nexus).
Arizona has adopted a Transactions Privilege Tax (TPT). It is a gross receipts tax that is generally broader than a sales tax and it imposes different rates on different types of businesses. Moreover, there is no obligation to pass the tax through to the customer, although most merchants choose to do so. For those merchants, the TPT operates in much the same way as a sales tax.
Below, we will highlight some of the basic provisions of Arizona sales tax law.
What is the tax rate range for Arizona?
State: Arizona’s general sales tax rate for retailers is 5.6%. Reduced rates apply to certain types of property (i.e., automobiles, farm machinery, etc.). See Arizona Department of Revenue
Local: Arizona localities impose their own sales tax at rates ranging from 0% to 5.6%. See Arizona Remote Sellers Page
Do you have physical or economic nexus in Arizona?
Physical nexus. Certain business activities create physical nexus in Arizona. If you have physical nexus, you are required to collect and remit sales tax on all sales that are shipped to Arizona. Examples of business activities that can create physical nexus in Arizona include:
- An employee present in the state more than two days per year
- Independent contractors or other representatives in Arizona for more than two days per year
- A physical office or place of business
- Goods in a warehouse in the state
- Personal property ownership
- Delivered merchandise using taxpayer owned vehicles in Arizona
Economic nexus. Remote sellers that exceed $100,000 in gross sales in the current or previous calendar year are required to collect and remit Arizona sellers use tax.
- Gross sales include all sales before any deductions.
- Gross sales do not include sales you make through marketplace facilitators
- Your obligation to collect begins on the first day of the first month that begins at least 30 days after you exceed the threshold. For example, if you exceed the threshold on February 15, you need to begin collecting on April 1.
What are examples of sales of taxable items?
- Tangible personal property, unless specifically exempted
- Prepared food
- Software as a Service (SaaS)
What are examples of sales of nontaxable/exempt items?
- Some prescription drugs
- Certain groceries are exempt from state tax, but not the local tax
- Some medical devices
Are there any sales tax holidays?
Currently, Arizona does not recognize any sales tax holidays.
Is Arizona a member of the SST (Streamlined Sales Tax)?
Currently, Arizona is not a full or associate member of the Streamlined Sales Tax Governing Board (SSTGB).
How to get a sales tax permit / links to register in this state?
You can register online at: Arizona Department of Revenue.
Local rate tables are available at: Arizona Department of Revenue - Tax Rate Table.