RATE OF SALES TAX:
5.60%
LOCAL & COUNTY MAXIMUM RATES:
5.60%
Table of Contents
Hire a Sales Tax Professional:
One such dependable service is:
TaxJar ($17/month) assists businesses with ecommerce sites in calculating sales tax at the checkout.
What Are the Taxable Goods and Services?
The first step in sales tax compliance is determining if the items or services your firm offers are taxable in Arizona.
Traditional Products and Services
In Arizona, purchases of tangible goods such as furniture, household appliances, and automobiles are subject to sales tax.
Arizona does not levy sales tax on purchases of food, prescription drugs, or fuel.
A thorough reference on sales tax exemptions and exclusions has also been provided by the Arizona Department of Revenue.
Digital Products and Services
Any electronically delivered item or service, such as a song downloaded from iTunes or a video or e-book bought from Amazon, is considered a digital offering.
Businesses in Arizona are required to collect sales tax at the usual rate on the sale of digital products or services.
How to Register for Sales Tax in Arizona
If you have concluded that you must charge sales tax on part or all of the products and services that your company sells, the next step is to apply for a seller’s licence.
This enables your company to collect sales tax on behalf of the municipal and state governments.
You will need the following information to register:
Ownership Structure
Legal Business Name Business Phone Number Mailing Address Email Address Federal Employer Identification Number or Social Security Number
Business Bonding Requirements Physical Location (If you’re a construction contractor)
Tax Information on Unemployment (for certain situations)
All firms must have a North American Industrial Classification System (NAICS) designation.
Find the NAICS code. You may do an NAICS Code Lookup to locate the NAICS Code for LLC that corresponds to your industry.
This information is required for all partners, corporate executives, and LLC managers/members.
A Resale Certificate might help you save money.
When acquiring items for resale, a resale certificate, also known as a reseller’s permit, permits firms to avoid paying sales taxes. The Arizona Department of Revenue provides a resale certificate for qualifying commercial transactions.
Sales Tax Collection
After obtaining your seller’s licence and starting your company, you’ll need to figure out how much sales tax to charge various consumers. It is critical for company owners to collect the right rate of sales tax to avoid penalties and the danger of expensive audits.
When computing sales tax, consider the following types of transactions:
Store Sales Shipping Within-State Sales Outside-State Sales
Retail Sales
For conventional company owners who sell products or services on-site, calculating sales tax is simple: all sales are taxed at the rate determined by the store’s location. Here’s an illustration of how this situation may look:
In Chandler, Arizona, Mary owns and operates a bookshop. Because books are taxable in the state of Arizona, Mary charges a flat 7.8% sales tax on all purchases. This includes Arizona’s 5.6% sales tax, Chandler’s 1.5% municipal sales tax, and Mary’s 0.7% county tax.
Shipping inside the state
When delivering to Arizona clients, your tax rate will be determined by the county and municipal tax districts that your company and the customer share. The three instances below demonstrate this concept:
Delivery to a Customer in Your City
You will be responsible for collecting state, county, and municipal sales tax when shipping to clients in the same city and county as your company.
Shipping to a Customer in Your Area
You will be responsible for collecting state and county sales tax when delivering to clients in a different city but within the same county as your company. You will not be liable for collecting municipal sales tax on your clients’ behalf.
Shipping to a Customer Who Lives Outside of Your City and County
When delivering to consumers outside of your city and county, you must only collect sales tax at Arizona’s base tax rate. You will not be liable for collecting sales tax on behalf of your consumers in the county or city.
Out-of-State Purchases
Businesses in Arizona must only pay sales tax on out-of-state sales if they have nexus in other states.
Nexus is a legal word that refers to a company’s actual presence in a state.
Common nexus types include:
A physical place, such as an office, retail shop, or warehouse.
An employee who works from home or as a roaming sales representative.
An affiliate marketer
Dropshipping from a third-party vendor.
A temporary physical site, such as a festival or fair booth.
Submit Your Sales Tax Return
You’re ready to submit your sales tax return now that you’ve obtained your Arizona seller’s permit and understand how to charge the correct amount of sales tax to all of your customers. You avoid penalties and fines, be sure to meet all filing dates.
How to File a Claim
Businesses in Arizona are required to file sales tax forms and make sales tax payments online.
How Frequently Should You File?
The frequency with which you must submit is determined by the total amount of sales tax collected by your firm. New firms might choose to file monthly or quarterly depending on their projected yearly revenue for the first 12 months of operation.
Annual filing: If your company collects less than $2000 in sales tax each year, you must submit annual filings.
Quarterly filing: If your company receives between $2000 and $8000 in sales tax each year, you need submit quarterly reports.
Monthly filing: If your company receives more than $8000 in sales tax each year, you must submit returns on a monthly basis.
Deadlines for Filing
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 the deadline is postponed to the following working day. The following are the filing deadlines for this year:
Penalties for Filing Late
Arizona assesses a late filing penalty of 4.5% each month or partial month, with a maximum penalty of 25% of the tax stated on the tax return. Even if a partial payment has been completed, the penalty still applies to the whole tax without any deductions.
Arizona additionally imposes a late payment penalty of 0.5% each month, up to 10% of the unpaid tax. When coupled with the aforementioned penalty, the total payment of the two fines cannot exceed 25% of the tax payable.