arizona-sales-tax

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# Arizona Sales Tax

## Section 1 -- Quick reference

**Quick reference**

| Field | Value |
| --- | --- |
| Jurisdiction | Arizona, United States |
| Jurisdiction code | US-AZ |
| Tax type | Transaction Privilege Tax (TPT) -- NOT a traditional sales tax; tax is on the SELLER |
| State TPT rate | 5.6% (retail classification) |
| Local add-on range | 0% -- 5.6% (city + county) |
| Maximum combined rate | ~11.2% |
| Sourcing | Origin-based for most TPT classifications |
| Economic nexus | $100,000 in gross proceeds or gross income (revenue only) |
| Primary legislation | A.R.S. Title 42, Chapter 5 |
| Tax authority | Arizona Department of Revenue (ADOR) |
| Filing portal | https://www.aztaxes.gov |
| SST member | No |
| Federal framework skill | us-sales-tax |
| Skill version | 2.0 |

**CRITICAL: Arizona TPT is a tax on the privilege of doing business in Arizona, imposed on the SELLER. It is NOT a sales tax on the buyer, though sellers typically pass it through.**

### Required inputs

**Required inputs**

| # | Question | Why it matters |
| --- | --- | --- |
| 1 | Arizona TPT license number? | Required for filing |
| 2 | Filing frequency? | Monthly, quarterly, annual |
| 3 | Nexus type? | $100K threshold |
| 4 | Business classification? | Different TPT rates by classification |
| 5 | Contractor? | Prime contracting has special 65/35 split rules |
| 6 | Sell into multiple cities? | City TPT rates vary significantly |

### Refusal catalogue

- **R-AZ-1** — Prime contracting classification. 65/35 split between real property and materials is complex. Escalate.  _(R-AZ-1 -- Prime contracting classification)_

### 3.1 Retail classification (5.6% state)

**Retail classification patterns**

| Pattern | Taxable? | Notes |
| --- | --- | --- |
| General TPP | TAXABLE | Retail classification |
| Clothing | TAXABLE | No exemption |
| Grocery food (unprepared) | EXEMPT | A.R.S. §42-5061(A)(1) |
| Prepared food | TAXABLE |  |

### 3.2 SaaS and digital goods

**SaaS and digital goods patterns**

| Pattern | Taxable? | Notes |
| --- | --- | --- |
| Canned software (physical or download) | TAXABLE | TPP |
| SaaS (cloud-hosted) | TAXABLE | Arizona treats SaaS as taxable |
| Digital goods | TAXABLE |  |

### 3.3 Services

**Services patterns**

| Pattern | Taxable? | Notes |
| --- | --- | --- |
| Professional services | NOT TAXABLE |  |
| Job printing | TAXABLE | Separate classification |
| Restaurants/bars | TAXABLE | Restaurant classification |
| Transient lodging | TAXABLE | Transient lodging classification |
| Personal property rental | TAXABLE | Rental classification |
| Prime contracting | TAXABLE | 65/35 rule applies |

### 3.4 Exemptions

**Exemptions**

| Pattern | Status |
| --- | --- |
| Grocery food | EXEMPT |
| Prescription drugs | EXEMPT |
| Manufacturing machinery (directly in manufacturing) | EXEMPT |
| Resale | EXEMPT |
| Interstate commerce | EXEMPT |

### 4.1 TPT classifications and state rates

**TPT classifications and state rates**

| Classification | State rate |
| --- | --- |
| Retail | 5.6% |
| Mining | 3.125% |
| Utilities | 5.6% |
| Telecommunications | 5.6% |
| Transient lodging | 5.5% |
| Restaurants/bars | 5.6% |
| Contracting (prime) | 5.6% |
| Rental of TPP | 5.6% |

### 5.1 TPT is on the seller

- **TPT liability** — TPT is a privilege tax on the seller for conducting business. The buyer is NOT legally liable. Most sellers pass the amount through to buyers.

### 5.2 Model City Tax Code

- **Model City Tax Code** — Arizona cities adopt the Model City Tax Code with local modifications. City rates and exemptions can vary significantly.

## Section 6 -- Return form and filing

Filed via AZTaxes.gov. Single return covers state + county + city TPT.

### 7.1 Economic nexus

**Economic nexus**

From openaccountants/openaccountants, AGPL-3.0.

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