Comprehensive legislation intended to increase electronic filing and payment of business taxes in Arizona, officially takes effect today. House Bill 2280, which was signed into law by Governor Ducey on March 29th, 2017, augments the Arizona Department of Revenue’s mission to expand electronic filing and paying of taxes in the state.
“Among many benefits, e-filing is more secure and it’s faster to process than paper returns, which means the Department of Revenue can provide enhanced customer service for all taxpayers,” said Arizona Department of Revenue Director, David Briant. “The e-file/e-pay legislation is part of the Department’s focus of delivering a results-driven, customer-focused management system to deliver better, faster, more cost effective services for Arizonans.”
Over a multi-year phase-in period, businesses will be required to file and pay transaction privilege tax (TPT) electronically. Also under HB2280, annual electronic filing of annual corporate income tax, fiduciary, and partnership returns will begin in tax year 2020.
“Through this legislation, the State of Arizona will be collecting tax at the speed of business,” said Department of Revenue Deputy Director, Dr. Grant Nülle, who pointed out one area that requires attention is the low volumes of electronic filing and payment of business taxes.
“Thousands of businesses already file transaction privilege tax electronically, but, the overall percentage is relatively low at 31 percent and businesses currently lack the ability to e-file any corporate income, partnership and fiduciary tax returns,” Dr. Nülle said. “The phased-in approach provides the Department of Revenue time to enhance its infrastructure framework to provide an electronic filing experience for all taxpayers.”
Other highlights of the legislation include the following:
- Incentivizes e-filing of TPT by increasing the credit for accounting and reporting expenses by up to $2,000 annually.
- Provides opt-outs for taxpayers lacking computer or internet access, as well as other circumstances that prevent e-filing.
- Expands the thresholds for most business taxpayers having to pay tax liabilities electronically. HB2280 now requires businesses with tax liabilities of between $500 and $20,000 to e-file during the phase-in period.
- Requires individual income tax preparers that prepare more than 10 income tax returns during any taxable year to file all tax returns electronically.
- Expands ability for electronic filing and payment of luxury taxes, such as tobacco and alcohol.
Effective dates for e-file/e-pay for transaction privilege tax under HB2280 for business that have the following liabilities in the previous calendar year:
- $20,000, beginning January 1, 2018 (enacted under Administrative Rule on July 1st, 2017)
- $10,000, beginning January 1, 2019
- $5,000 beginning January 1, 2020
- $500 beginning January 1, 2021
The current e-file/e-pay rates for Arizona's three major tax types are as follows:
- Transaction Privilege Tax is 31 percent for e-filing and 36 percent for e-paying.
- Corporate income tax e-filing is zero percent and 11 percent for e-paying.
- Individual income tax e-filing is 80 percent and 24 percent for e-paying.