Important Information When Municipalities Pass Tax Rate Changes
The Arizona Department of Revenue’s focus is on serving our customers, so the Agency feels it is important to provide awareness as to why there is sometimes a difference between the Department updating a rate change in its tax tables and the taxing jurisdiction.
The Department has an agreement in place with municipalities, which includes a process for when there is a tax rate change by any city or town, there is a 60-day period before implementation. This way our customers, Transaction Privilege Tax (TPT)-licensed businesses, have time to prepare for the tax rate change.
While ADOR can update its system rather promptly, there are factors that have a direct impact on businesses, including giving affected businesses enough time to update their sales systems and allowing tax software providers the necessary time to update their software in order to timely disseminate it to their clients, the business owners.
The Department of Revenue recognizes the importance of providing a business adequate time to update its system so it can accurately report and file its TPT liability. If ample time isn’t allowed for a business to have its tax collection system updated to comply with a new tax, the entity will be subject to penalty and interest when they file and do not remit the correct tax amount.
Under TPT, a business can pass on the TPT to its customers. Without adequate time to implement the increased tax rate though, a business may pass on the wrong TPT rate to its customers. For businesses that collect the new tax rate prior to the effective date, the tax should be submitted to ADOR as “excess city tax” and listed on the reporting form and through the online filing process on AZTaxes.gov.