Exemption Letter Not Required

When the nonprofit acts as a customer, the vendor may legally pass the economic expense of the tax on to the customer (i.e., the nonprofit). Accordingly, the nonprofit customer will indirectly pay the tax, unless there is a specific statutory exemption.

Normally, to take advantage of an exemption, nonprofits must provide the business with an accurately completed exemption certificate (i.e., a Form 5000), but do not need anything further from the Arizona Department of Revenue.

The organizations listed below do not need to apply annually for an exemption letter. Please note: The transactions made in the business classifications listed below are exempt to the organization as the customer.

  • Nonprofit charitable I.R.C. § 501(c)(3) organizations that regularly serve meals to the needy or indigent on a continuing basis at no cost. Exemptions available:
    • Retail - Exempt from State and City Tax
    • Rental of Tangible Personal Property - Exempt from State and City Tax
    • Restaurant - Exempt from State Tax ONLY (Taxable for City)
    • Use Tax - Exempt from State and City Tax
  • Nonprofit charitable I.R.C. § 501(c)(3) organizations that provide residential apartment housing for low-income persons over 62 years of age in a facility that qualifies for a federal housing subsidy. Exemptions available:
    • Retail - Exempt from State and City Tax
    • Rental of Tangible Personal Property - Exempt from State and City Tax
    • Prime Contracting - Exempt from State Tax ONLY (Taxable for City)
    • Use Tax - Exempt from State Tax ONLY (Taxable for City)
  • Nonprofit charitable I.R.C. § 501(c)(3) organization that solely provides graduate and postgraduate education in the health sciences. A qualifying health sciences educational institution is defined in section A.R.S. § 42-5001.  Exemptions available:
    • Retail - Exempt from State and City Tax
    • Rental of Tangible Personal Property - Exempt from State and City Tax
    • Publication - Exempt from State Tax ONLY (Taxable for City)
    • Job Printing - Exempt from State Tax ONLY (Taxable for City)
    • Use Tax - Exempt from State Tax ONLY (Taxable for City)

When these organizations engage in transactions with business owners and those transactions are exempt, they should submit an accurately completed Form 5000, TPT Exemption Certificate – General, along with their I.R.C § 501(c)(3) determination letter issued by the IRS. Unless otherwise specified by statute, the above listed organizations are not entitled to other deductions or exclusions from transaction privilege tax (TPT). Additionally other nonprofit organizations not falling within the above categories are not entitled to any TPT deductions.