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Arizona Department of Revenue (ADOR) conducts business audits using applicable Arizona Revised Statutes and Model City Tax Codes that govern the audit process. An audit by the Department is an educational process to continue voluntary compliance with tax obligations and to ensure taxpayers remit tax correctly. An auditor reviews financial records, verifies income, purchases, exemptions, deductions, and inventories. Auditors conduct the review professionally and efficiently with minimum disruption to taxpayers’ operations.
The Arizona Department of Revenue (ADOR) is tasked in A.R.S. Title 42, Chapter 5, Article 10 with collecting the excise tax (imposed only by the state) and transaction privilege tax (state, counties, and cities) imposed on adult use marijuana sales.
ADOR conducts business audits on adult use marijuana establishments within the State of Arizona. An audit conducted by the Department’s Transaction Privilege Tax (TPT) Unit covers TPT, use tax, excise tax, and inventories.
Adult use TPT business classes include, but are not limited to: 029, 030, 017, 420, 421, 422, and 920.
Adult use establishments that are also medical use (Dual License) will be classified as a joint audit.
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If you have any questions, please contact the Arizona Department of Revenue at [email protected].
ADOR conducts audits on medical marijuana dispensaries within the State of Arizona. An audit conducted by the Department’s Transaction Privilege Tax (TPT) Unit covers the topics of TPT, use tax, and inventories.
Financial audits for medical marijuana dispensaries include the following TPT business classes: 029, 030, 017, 203, 221, and 222.
Medical marijuana dispensaries that are also adult use (Dual License) will be classified as a joint audit.
For reference, use the webpage TPT Audit to review the standardized audit process.
Review the Record Requirement List for documentation required for the financial and inventory audit. Additional information may be requested for the completion of the audit, such as:
Auditors may request additional records throughout the audit process based on findings.
If you have any questions, please contact the Arizona Department of Revenue at [email protected].
How to handle buy one get one free (BOGO) items.
BOGO items are considered items of reduced cost. Tax is going to be paid on the reduced sale price of those items. For instance, Business B is having a Buy One Get One Free sale. The cost of the item they sell is $10.00. If a consumer purchases that $10.00 item, they get a like item for free. When those items are run through Business B's POS system, it discounts each item by 50%, saving the consumer $10.00 - the equivalent of the free item. Then, the POS system for Business B will apply the state/county and municipality tax rates to the reduced cost of both items.
How to tax bundles/packages.
Different business codes may be required to be use to file properly. If the items are being sold as a bundle (pen and cartridge), the sale should be reported under business class 203 (medical marijuana) or 420 and 920 (adult use and applicable excise tax). If the items are sold separately, the sale of the pen should be reported under business class 017 (retail), and the sale of the cartridge should be reported under business class 203 (medical marijuana) or 420 and 920 (adult use and applicable excise tax).
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