Travelers, beware! Whether you’re in Arizona for business or pleasure, if you purchase tangible personal property in Arizona and have it shipped to another state or country, you will have to pay Arizona sales tax on your purchase.
This is a change in policy. Prior to January 1, 2015, out-of-state or out-of-country residents could purchase taxable goods in Arizona, have them shipped or delivered to a location out of Arizona, and Arizona transaction privilege tax (sales tax) would not apply to the sale. Beginning January 1, sales tax applies to all such sales, with the exception of motor vehicles and deductible interstate or foreign commerce.
Motor vehicles
Motor vehicles are still exempt from Arizona sales tax when they are purchased by out-of-state residents and are shipped, delivered, or taken directly out of state.
Deductible interstate or foreign commerce
“[S]ales made in interstate or foreign commerce that are deductible under A.R.S. § 42-5061.A.24” remain deductible. For example, if an Arizona seller receives an order (by phone, mail or internet) from an out-of-state customer and then ships or delivers the order out-of-state, then the gross receipts are deductible. In order for the deduction to apply, all of the following must be true:
- The order is received from a location outside of Arizona.
- The retailer ships or delivers the tangible personal property to a location outside of Arizona for use outside of Arizona.
Prove it
Whenever there are deductions or exemptions from sales tax, there must be records to substantiate the deduction or exemption. According to the Arizona Department of Revenue, “[s]uitable records for substantiating the receipt of an order from out-of-state may include” the following:
- Purchase orders
- Letters or written memoranda on the receipt of orders placed by telephone
For out-of state shipments, the department will accept numerous records, including the following:
- “Internal delivery orders supported by receipts of expenses incurred in delivering the property and signed on the delivery date by the person who delivers the property
- Common carrier’s receipt or bill of lading
- Parcel post receipt
- Export declaration
- Receipt from a licensed broker
- Proof of export or import signed by a customs officer”
Additional details are available on the Arizona Department of Revenue notice, Retail Changes Effective January 1, 2015.
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