Use Tax Examples

To clearly understand how use tax works, ADOR has provided the following examples to help taxpayers.

Ex. 1:

I purchased merchandise from a catalog company based in Illinois. The seller charged me Arizona tax. Why was I charged tax? Should I report these purchases?

If the catalog company charged Arizona tax, the business did so because the company has a presence in Arizona requiring it to pay transaction privilege tax, or it is registered to collect use tax on behalf of its customers. Assuming the catalog company charged the correct tax rate, the taxpayer does not need to report these purchases because he or she paid the appropriate tax directly to the catalog company, which will then remit the tax to ADOR.

Ex. 2:

I purchased a pair of shoes over the internet from a company in Montana. The seller shipped the shoes to my home and did not charge me any tax. Should I report these purchases?

Yes. This is an example in which use tax is due.

Ex. 3:

I purchased a digital camera by mail order from a company in New Jersey. The company did not charge me Arizona tax. I purchased the camera as a gift for a friend. Should I report this purchase?

Yes. The purchase is subject to use tax regardless of whether the taxpayer uses the camera or gives it as a gift to a friend.

Ex. 4:

I ordered assorted specialty luncheon meats, cheeses and crackers from a company based in Wisconsin for consumption at home. Will Arizona use tax apply to this purchase?

No. In this case, the taxpayer would not report the purchase of this item. Luncheon meats, cheeses and crackers purchased for home consumption are food products, which are exempt from tax.

Ex. 5:

I ordered a stove and refrigerator from a company based in New Hampshire. I had them ship the items directly to my cabin in Colorado. I plan to install these items in the cabin when I visit there later this year. Do I owe Arizona use tax on this purchase?

No. The Arizona use tax only applies to property used, consumed or stored in this state. Since the stove and refrigerator were never stored or used within Arizona, the taxpayer is not required to report or pay Arizona use tax on this purchase.

Ex. 6:

I purchased a used set of golf clubs over the internet from an individual in Connecticut. The seller shipped them to my home and did not charge me any tax. The individual is not in the retail business. Should I report these purchases?

No. Items purchased for use in Arizona from individuals making isolated or occasional sales, and who are not engaged in the business of selling tangible personal property at retail, are not subject to use tax.