Arizona Sales Tax Nexus
Businesses with nexus in Arizona are required to register with the Arizona Department of Revenue and to charge, collect, and remit the appropriate tax. In lieu of a sales tax, Arizona imposes transaction privilege tax (TPT) — a tax on income or proceeds derived from engaging in a taxable business within the state.
Generally, a business has nexus in Arizona when it has a physical presence there, such as a retail store, warehouse, inventory, or the regular presence of traveling salespeople or representatives. However, out-of-state sellers can also establish nexus in the ways described below.
Arizona nexus for out-of-state sellers
The Arizona Department of Revenue provides general guidelines on activities that may cause a business to exceed the minimum nexus threshold and trigger a TPT or use tax requirement:
- Having an employee present in Arizona for more than two days per year
- Owning or leasing real property in Arizona
- Maintaining an office or place of business in Arizona
- Delivering merchandise into Arizona on vehicles owned or leased by the taxpayer
- Having independent contractors or other non-employees represent the taxpayer in Arizona for more than two days per year, for the purpose of establishing and maintaining a market for the taxpayer. Examples include:
- Collecting delinquent accounts
- Conducting training for employees, representatives or customers
- Delivering property sold to customers
- Installing products
- Making repairs
- Resolving customer complaints
- Soliciting sales
- Soliciting, negotiating or entering into franchise agreements
Out-of-state sellers with nexus in Arizona are required to collect and remit TPT or use tax. The tax rate is based on the location of the buyer. Historically, this has added complexity to Arizona TPT compliance, because many local governments administered their own local taxes. As of January 1, 2017, however, the Arizona Department of Revenue (ADOR) has taken control as the central licensing and reporting agency for TPT and use tax, allowing sellers to use a more streamlined process for tax returns.