SALES TAX TUESDAY 2019: ARIZONA

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A rose by any other name would smell as sweet, even if it was a ‘cactus rose,’ and a sales tax would still ‘be a sales tax’ even if you called it something else; because if it looks like a sales tax, acts like a sales tax, gets charged like a sales tax, and collected like a sales tax, chances are it’s a sales tax, even though the Arizona State Department of Revenue calls it a “Transaction ‘Privilege’ Tax” (TPT). I guess that makes it clear that I made my way through the four-corners area when I left Durango (Colorado) and headed into northeastern Arizona. By the way, when it comes to TPT, you can’t do very much in Arizona without paying TPT tax on what you are doing or what you are buying.

Speaking of TPT, which is what Arizona assesses in lieu of sales tax, I have to remind you that this Sales Tax Tuesday 2019 feature is one in a series that Insightful Accountant, in cooperation with Avalara, the ‘sales tax people,’ is bringing you about sales tax in each and every state tax jurisdiction in the United States. This series actually started last year (2018) but we got so busy with breaking sales tax news about Nexus and mind-altering changes to sales tax practices and policies, and we couldn't get all the states covered during 2018. As a result, we are still traveling around in our Sales Tax RV visiting states, like Arizona that don’t even have sales tax, but have ‘TPT’ instead.

When it comes to Arizona, most people think of places like Phoenix, Scottsdale, Tempe, Mesa and perhaps Tucson. One of my favorite areas is actually located just a little north of the ‘outer loop’ of the Phoenix/Scottsdale metroplex in Carefree, Arizona. The name pretty well says it all, because it can be a pretty carefree existence, but in reality the landscape says it even better, since this place is known as ‘The Boulders’ (you can see why in the picture below). I can say that years ago I spent far too much time here ‘for my own good’ (enough said).

There are a lot of other areas in Arizona like Flagstaff and Prescott, and the thing about many of these places is that they often seem remote and removed, so that they too are pretty 'carefree.'

In fact, a lot of people like them because they do seem that way, and yet an hour or so drive and you are in Phoenix or Tucson for everything from fine dining to leisurely resorts; to golf, and the arts; to professional and college sports, just whatever your fancy.

But we should not not forget that Arizona was a big part of ‘The Wild West,’ so as I mentioned in my 2015 edition of Sales Tax Tuesday, who could forget the Old West town of Tombstone made famous by the shoot-out at the OK Corral. The photo below, taken from the hill looking down below at Tombstone, shows the way the town looked in 1881; the same year as the shootout. Somewhat different than the movie depictions and reproductions found in today’s Tombstone tourist town.

When you visit the Old West town today, you will pay plenty of TPT for your ‘sarsaparilla’ in a saloon, your T-shirts in the dry-goods store, and to watch the various staged reproductions to bring out ‘the cowboy’ in you.

Traveling east and west in Arizona is typically along Interstate 40 in the north part of the state where there are some landmarks; just west of Winslow you will find Meteor Crater which is the largest meteor ‘crater’ in the United States. West toward California is Kingman, the former home of one of the conspirators in the Oklahoma City bombing and believed to be at least one of the locations where a portion of the planning took place for the attack. 

Forgive me, I always get more than a little cynical when I speak of the OKC Bombing having lost such a close friend there. As you can see Meteor Crater is ‘one big’ hole in the ground. By the way, if you stop to see the crater, it’s operated by a private entity, so you won’t be impacted by any ‘restrictions on access’ that might plague as a result of the current governmental budgetary issues involving the Department of Interior. Just be prepared to pay Arizona TPT on your admission and all the purchases you might make at the visitor center or when staying at the RV facilities.

Much of Arizona remains either tribal reservation areas, lands under control of the Bureau of Land Management, lands under the National Forest Service, or lands under the National Park Service, along with lands under the control of various other national agencies (Bureau of Reclamation, Department of Defense, Fish and Game, etc.). As a result of all these ‘governmental lands,’ the actual tax base in Arizona is minimized, which means that state and local governments have had to find ways to maximize revenues. 

A consequence of the ‘stricture’ in terms of geographical boundaries in which taxes can be applied within Arizona undoubtedly is one factor impacting the state’s standing as one of only seven ‘home rule’ states whereby local jurisdictions can not only assess their own local taxes, but assessing those taxes as well. At present there are 131 different jurisdictions within Arizona to contend with when it comes to sales taxes (or the equivalent); however, in 2017 businesses began reporting all their TPT activity via a centralized reporting and payment system via ADOR ‘one return.’

With that said, here are some of the 'Tax Facts' to be aware of:

  • The Arizona (AZ) Transaction Privilege Tax (TPT) rate is currently 5.6%. Even though this is not a sales tax, it is commonly referred to as ‘sales tax.’
  • The Arizona Department of Revenue is responsible for administration of the Arizona TPT. ADOR also now accepts filings for all TPT activity through a centralized reporting and payment system for one return per TPT license which means separate returns per jurisdiction are no longer required (as of 2017).
  • Arizona is not a member of the Streamlined Sales Tax (SST).
  • Each of Arizona’s 131 tax jurisdictions can set their own tax rates. Depending on local municipalities, the total tax rate (state,  county and municipality) can be as high as 11.2%.
  • Business owners selling taxable goods or services in Arizona act as an agent of the State of Arizona by collecting transaction privilege tax from purchasers and passing it along to the Department of Revenue. Any transaction privilege tax collected belongs to the Department of Revenue. It is the business owners’ responsibility to manage the transaction privilege tax they collect to remain in compliance with state laws and avoid penalties and interest.
  • Based on the total transaction privilege tax collected, businesses are assigned a filing frequency.
  • The Arizona Department of Revenue recommends all new businesses register online. Businesses may register for an Arizona Transaction Privilege Tax License online by visiting AZTaxes and following the instructions provided.
  • The Arizona Department of Revenue recommends all taxpayers filing transaction privilege tax file online at AZTaxes and follow the instructions provided.
  • For information regarding TPT Exemptions see this official ADOR website.

Can you afford to try to stay on top of so many tax jurisdictions on your own? Can you risk the liability of failing to properly collect, maintain, report and remit all the various taxes that are due for so many jurisdictions even if you can now remit them all to the ADOR?

Avalara provides solutions for tax automation, even Arizona Transaction Privilege Tax, including tax calculation, exemption certificate management, returns processing and 1099 filing and reporting. Automation via AvaTax allows businesses to be fully tax compliant without sacrificing productivity. With Avalara, you won't be wasting your time with checking which tax changes apply to you today, or letting tax compliance consume your valuable time that should be spent on building your business and servicing your customers. Nor will you feel like you have been called out into the street for a shoot out at the OK Corral when the tax auditor comes calling because you will know for a fact that 'the good guys' are on your side with Avalara's Tax Compliance and Audit specialists.