Economic Threshold
House Bill (H.B. 2757) introduces a new economic (dollar-based) nexus standard for businesses that have no physical presence in Arizona.
Economic nexus is established if the following thresholds either were met in the previous calendar year or are met in the current year.
- For a marketplace facilitator Arizona gross sales (before any deductions) of more than $100,000 in sales.
- For a remote seller Arizona gross sales (before any deductions) of:
- $200,000 (2019)
- $150,000 (2020)
- $100,000 (2021 and beyond)
Things to note:
- Sales made by remote sellers or marketplace sellers through a marketplace facilitator are not included in the remote seller's economic nexus threshold calculation.
- Arizona transaction privilege tax (TPT) due on these sales are reported and remitted by that marketplace facilitator.
- Sales made by a remote seller directly into Arizona (i.e., not through a marketplace) are reported by the remote seller that must be licensed and collect once the threshold is met.
- Thresholds are calculated by including any income generated by an affiliated party of either a remote seller or a marketplace facilitator.
- An affiliated party is a person or company with more than 5% ownership in the other party or is related because a third person or company (or group of persons or companies) holds an ownership interest of more than 5%.
- Although economic nexus may be established by combining the income of an affiliated party or parties, once established, each affiliated party must be licensed and may report individually or consolidated. Affiliated parties are not required to file consolidated returns.
- A remote seller or marketplace facilitator must remit tax in the month following 30 days after the threshold was met, and continue to collect and remit for the remainder of the year and the year following.
For example:
| Threshold Met | 1st Remittance |
|---|---|
| February 15 | April 1 |
Do I Need to Register and File as a Remote Seller?
Effective October 1, 2019, a remote seller should review their Arizona sales for the current and previous year to see if their direct sales (non-marketplace sales) into Arizona meet the following threshold:
Remote Seller 2019 Threshold
| My Arizona sales were greater than $200,000 in 2018 | My Arizona sales are greater than $200,000 in 2019 | Should I register and file in 2019? |
| Y | Y | Y |
| N | N | N |
| Y | N | Y |
| N | Y | Y* |
*Must register when threshold met and remit TPT on amounts after threshold met.
Remote Seller - 2019 Threshold Examples
Threshold - $200,000
| Facts | Result |
|
Alex Arizona sales: $203,000 in 2018. $253,000 in 2019. |
Must register on October 1, 2019, for a TPT license. Must report all Arizona sales made after this date. Must renew TPT license in 2020 because 2019 Arizona sales meet $150,000 threshold. |
|
Beatrice Arizona sales: $156,000 in 2018. $162,000 in 2019. |
Not required to register and file/report for 2019. Must register and file from January 2020 since $150,000 threshold met in 2019. |
|
Clyde Arizona sales: $217,000 in 2018. $149,000 in 2019; sales of $140,000 as of October 1, 2019. |
Must register on October 1, 2019, for TPT license (threshold met in 2018) Must report $9,000 of Arizona sales after meeting the threshold. Not required to renew TPT license in January 2020. Must monitor sales into Arizona for 2020 threshold ($150,000) to determine whether/when to register for TPT license if threshold met during the year. |
|
Wyatt Arizona sales: $140,000 in 2018. $234,000 in 2019; $200,000 by November 1, 2019. |
Must register to file on November 1, 2019. Must report $34,000 Arizona sales after meeting the threshold. Must renew TPT license in January 2020 and file on all Arizona 2020 sales because $150,000 threshold met in 2019. |
Beginning January 1, 2020, a remote seller that did not meet the threshold in 2019 should review its Arizona direct sales for 2019, and continuously in 2020, using the $150,000 threshold. Note that this threshold may be met at any time in 2020:
Remote Seller 2020 Threshold
| 2019 Arizona direct sales greater than $150,000 | 2020 Arizona direct sales greater than $150,000 | Do I need to register in 2020? |
| Y | Y | Y |
| Y | N | Y |
| N | N | N |
| N | Y | Y* |
Remote Seller - 2020 Threshold Examples
Threshold - $150,000
| Facts | Result |
|
Alex Has TPT license Arizona sales: $253,000 in 2019. $155,000 in 2020. |
Must renew in January 2020 and file and report TPT for the year on all sales. Must renew TPT license in 2021 because 2020 Arizona sales met the threshold ($100,000). |
|
Beatrice Does not have a TPT license Arizona sales: $162,000 in 2019. $148,000 in 2020. |
Must register on January 1, 2020, and report all Arizona sales because threshold ($150,000) met in 2019. Must renew in 2021 since threshold ($100,000) met in 2020. |
|
Clyde (see 2019 example) Has TPT license Arizona sales: $149,000 in 2019. $78,000 in 2020. |
Must renew in January 2020 and file and report TPT for the year on all sales. May cancel TPT license in 2021 since threshold ($100,000) not met in 2020. Must monitor Arizona sales in 2021 to determine whether to reinstate the license. |
|
Wyatt Has a TPT license Arizona sales: $234,000 in 2019. $250,000 in 2020. |
Must renew in January 2020 and file and report for the year. Must renew TPT license and file on all Arizona 2021 sales because 2020 Arizona sales met the threshold ($100,000). |
Beginning January 1, 2021, a remote seller that did not meet the threshold in 2020 should review its Arizona direct sales for 2020, and continuing in 2021, using the $100,000 threshold. Note that this threshold may be met at any time in 2021.
Remote Seller Registration for 2021
| 2020 Arizona direct sales greater than $100,000 | 2021 Arizona direct sales greater than $100,000 | Do I need to register in 2021? |
| Y | Y | Y |
| Y | N | Y |
| N | Y | Y* |
| N | N | N |
*Must register when threshold met and remit TPT on amounts after threshold met.
Remote Seller - 2021 Threshold Examples
Threshold - $100,000
| Facts | Result |
|
Alex Has a TPT License Arizona sales: $155,000 in 2020. $148,000 in 2021. |
Must renew TPT license in January 2021 and file and report for the year. Must renew TPT license in January 2022 and file and report for the year because 2021 Arizona sales met the threshold ($100,000). |
|
Beatrice Has a TPT license (see 2020 example) Arizona sales: $148,000 in 2020. $156,000 in 2021. |
Must renew TPT license in January 2021 and file and report for the year because 2021 threshold ($100,000) met in 2020. Must renew TPT license in January 2022 file on all Arizona 2022 sales because 2021 Arizona sales met the threshold ($100,000). |
|
Clyde Does not have a TPT license (canceled in January 2021– see 2020 example) Arizona sales: $78,000 in 2020. $146,000 in 2021; $100,000 as of September. |
Must register for a TPT license and report on the $46,000 Arizona sales he made after meeting the threshold.
Must renew and file on all Arizona 2022 sales because his 2021 Arizona sales met the threshold ($100,000). |
|
Wyatt Has a TPT license Arizona sales: $250,000 in 2020. $275,000 in 2021. |
Must renew in January 2021 and file and report for the year. Must renew in January 2022 and file on all Arizona 2022 sales because his 2021. Arizona sales met the threshold ($100,000). |
Remote sellers and marketplace facilitator licenses do not have renewal fees. The cost of a TPT license is $12 and is valid for the calendar year in which it is issued, but may be renewed for subsequent years at no additional cost.
Do I Need to Renew as a Remote Seller?
| Previous year: Arizona direct sales greater than $100,000 | Current year: Arizona direct sales greater than $100,000 | Do I need to renew next year? |
| Y | Y | Y |
| Y | N | N |
| N | Y | Y |
| N | N | N |
Do I Need to Register and File as a Marketplace Facilitator?
Effective October 1, 2019, and for each subsequent year thereafter, a marketplace facilitator should review all its Arizona sales (its and marketplace seller sales) for the current and previous year to see if it meets the following threshold:
Marketplace Facilitator Registration $100,000 Threshold
| Previous Year | Current | Do I need to register in the current year? |
| Y | Y | Y |
| N | Y | Y* |
| Y | N | Y |
| N | N | N |
*Must register when threshold met and remit TPT on amounts after threshold met.
Do I Need to Renew as a Marketplace Facilitator?
Starting January 1 of each subsequent year, a marketplace facilitator should review all Arizona sales the previous year, using the $100,000 threshold, to determine if it needs to renew its TPT license. Additionally, throughout the year, if the threshold was not met in the previous year, the marketplace facilitator should review its sales to determine whether the threshold is met. If the threshold is met in the current year, the marketplace facilitator must register for a TPT license.
Marketplace Facilitator Renewal $100,000 Threshold
| Previous Year | Do I need to renew in the following year? |
| Y | Y |
| N | Y* |
*Must register when threshold met and remit TPT on amounts after meeting the threshold.
Remote sellers and marketplace facilitator licenses do not have renewal fees. The cost of a TPT license is $12 and is valid for the calendar year in which it is issued, but may be renewed for subsequent years at no additional cost.