FAQ - Remote Sellers and Marketplace Facilitators

South Dakota v. Wayfair is a 2018 U.S. Supreme Court ruling that allows states to require out-of-state businesses without a physical presence to collect and remit tax on sales from transactions in their state based on certain economic and transactional thresholds.

On May 31, 2019, Arizona Governor Doug Ducey signed H.B. 2757 into law. This legislation requires retailers that are remote sellers and marketplace facilitators with no physical presence in Arizona but make sales into Arizona over certain threshold amounts to begin filing and paying transaction privilege tax (TPT) in Arizona starting with taxable periods from and after October 1, 2019.

No, remote sellers and marketplace facilitators will begin to pay transaction privilege tax (TPT) on retail sales to Arizona customers starting October 1, 2019.

Because of Arizona’s new laws, retailers that currently have no physical presence in Arizona are required to collect and remit transaction privilege tax (TPT) based on the volume of sales of tangible personal property into Arizona. Click HERE to view thresholds.

A marketplace is any physical or electronic place, platform or forum, including a store, booth, internet website, catalog, or dedicated sales software application, where products, including tangible personal property, are offered for sale. See Arizona Revised Statutes (A.R.S.) § 42-5001(8).

Arizona’s transaction privilege tax differs from the sales tax imposed by most states. It is a tax on the privilege of conducting business in the State of Arizona. Differing from an actual sales tax, the TPT is levied on income derived by the seller, that is legally allowed to pass the economic expense of the tax on the purchaser. However, the seller is ultimately liable to Arizona and its local jurisdictions for the tax.

The new law covers remote sellers and marketplace facilitators that do not have a location or other physical presence in Arizona and includes out-of-state wholesalers and manufacturers. Depending on their tax liability, wholesalers and manufacturers may be able to report on an annual basis. Please see the TPT filing frequency page for more information.

A marketplace seller is a person or business that does not sell on its website, storefront, etc. but sells only through one or more marketplaces operated by marketplace facilitators.

No, you are not required to obtain a transaction privilege tax (TPT) license if you only sell through a marketplace facilitator. Your marketplace facilitator(s) should provide you with documentation that it will be collecting and remitting the TPT on your behalf.  Such documentation may include an email or other specific communication directed to the sellers on the marketplace that specifies the marketplace facilitator will collect and remit TPT on sales to Arizona customers. 

For the convenience of marketplace facilitators, the department has created an exemption certificate that may be pre-filled and provided to sellers.  While this certificate is provided as a convenience to marketplace facilitators, a marketplace facilitator may choose to provide its documentation.  Marketplace sellers should retain this documentation for their files. Click HERE for the Arizona marketplace exemption certificate

Although marketplace sellers are not required to obtain a TPT license if they only sell through a marketplace facilitator, they may choose to do so.  If the marketplace seller obtains or retains their TPT license, they will be required to file TPT returns but may deduct the gross receipts collected by the marketplace facilitator by using deduction code 804.

If your direct sales to Arizona customers exceed the economic threshold, you are required to file and report as a remote seller. You must obtain a TPT license at AZTaxes.gov. See the thresholds matrix HERE.

If you are a marketplace seller and only sell through a marketplace facilitator, you may cancel your license after receiving an exemption certificate, or other proper documentation, from your marketplace facilitator.

The address a marketplace facilitator should look up will vary depending on whether the marketplace facilitator is located in or outside Arizona. 

• For marketplace facilitators located in Arizona, sales should be reported using: (a) the tax rates and codes of the marketplace facilitator’s location in Arizona, if the order information is received in Arizona, and (b) the tax rates and codes of the customer’s address, if the order information is received outside Arizona. 
• Sales made through a marketplace facilitator outside Arizona are sourced to the shipping address of the consumer.  If there is no shipping address, the sale is sourced to the customer’s billing address (A.R.S. § 42-5040). 

Use the physical address, or if the shipping address is unknown, the billing address, the Map Locator link can be used to find the location. Select the appropriate business description and the state/county and city TPT rates along with the business codes needed to report gross receipts, which will be displayed.

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Arizona Transaction Privilege & Use Tax Rate Look Up Tool

A remote seller is any person or business making direct sales to Arizona customers and shipping products into Arizona but does not have a physical presence or other legal requirements to obtain a TPT license. Physical presence includes having a storefront, people or equipment in Arizona. If you meet these physical presence requirements, you are not a remote seller, and you must be licensed as an Arizona retailer.

The threshold matrix is used to assist you in determining if you meet the economic nexus threshold and are required to file and pay TPT. Click HERE for the threshold matrix.

If you believe your business has economic nexus and not a physical presence in Arizona, and you are already licensed, you should contact the E-Commerce Compliance and Outreach (ECCO) team for further guidance.

Remote sellers are sellers that do not have a business location or other physical presence in Arizona. Therefore, if you are an Arizona business with a business location in Arizona and you sell online, you are not a remote seller. There is no change in law regarding Arizona retail businesses. Such businesses may continue to collect and report the TPT as they always have. Please see below for information on Arizona marketplace facilitators.

Arizona businesses that sell online to customers in other states are considered Arizona retailers and must collect and remit the tax to the department for sales to Arizona customers. Regarding sales to out-of-state customers, many states have adopted provisions similar to Arizona. Those provisions may differ somewhat from those enacted by Arizona, and they may have different effective dates and threshold requirements. Please contact the E-Commerce Compliance and Outreach (ECCO) team for further information.

No. You are considered a marketplace seller, and no TPT license is required. The marketplace facilitator will collect and remit TPT on your behalf. However, you should obtain an exemption certificate, or other proper documentation, indicating the marketplace facilitator will collect and remit the tax on your behalf. Click HERE to download the exemption certificate.

Remote sellers should report taxes on sales to Arizona customers to the customer’s shipping address.  If there is no shipping address, the taxes should be reported to the customer’s billing address (A.R.S. § 42-5040). 

Use the physical address, or if the shipping address is unknown, the billing address, the Map Locator link can be used to find the location. Select the appropriate business description and the state/county and city TPT rates along with the business codes needed to report gross receipts, which will be displayed.

Internet Explorer, Chrome and Firefox currently support this feature.

Arizona Transaction Privilege & Use Tax Rate Look Up Tool

If you make direct sales to Arizona customers on your own, and you do not have any physical presence in Arizona, you will have to obtain a TPT license if you meet the economic nexus thresholds based on your direct sales into Arizona. For your sales, you will license and report as a remote seller. For sales you make through a marketplace facilitator, the marketplace facilitator is responsible for those sales and should provide you with an exemption certificate or other proper documentation.

Helpful Links:

Exemption Certificate Procedure TPP 17-1

Filing Examples

You will only have to report the income received through the marketplace facilitator if you also make direct sales into Arizona on your own. In that case, you will deduct sales obtained through the marketplace facilitator using deduction code 804.

If the marketplace facilitator did not provide you with an exemption certificate, and your sales into Arizona otherwise meets the threshold, the income received through the marketplace facilitator will be included in your gross receipts and is taxable. A deduction may only be taken if you have the proper exemption certificate or other appropriate documentation. You must then remit TPT on those sales made through the marketplace facilitator in that instance.

Yes, if the company meets the economic nexus threshold. Click HERE for the threshold matrix.

You should be registered for a TPT license as a retailer (not remote sellers) because you have a physical presence by having employees in Arizona. You will be subject to the ordinary rules as an Arizona retailer. The economic nexus thresholds will not apply.

You will need to update your current license to indicate that you are a remote seller. Please contact the Department of Revenue’s E-Commerce Compliance and Outreach (ECCO) team for assistance by phone: 833-293-7253 (833-AZeSale).

A marketplace facilitator is any business operating a marketplace (see definition above) by listing or advertising for sale, on behalf of others, items of tangible personal property and accepts payment on behalf of the seller and then remits the sales proceeds to the seller. A marketplace facilitator may additionally sell its products on its marketplace.

Yes, a marketplace facilitator may have a physical presence in Arizona. In that case, the marketplace facilitator must obtain a TPT license regardless of its sales volume. A marketplace facilitator may also be located out-of-state with no physical presence in Arizona. In that case, the marketplace facilitator will only be required to obtain a TPT license if it meets the threshold requirements for sales to Arizona customers.

A marketplace facilitator that does not have a physical presence in Arizona but meets the economic threshold must register and remit the TPT on sales into Arizona. The threshold matrix is used to assist you in determining if you meet the economic threshold and are required to file and pay TPT. Click HERE for threshold matrix.

You will need to update your current license to indicate that you are a marketplace facilitator. Please contact the Department of Revenue’s E-Commerce Compliance and Outreach (ECCO) team for assistance by phone: 833-293-7253 (833-AZeSale).

No. You are not required to provide exemption certificates until you have met your economic threshold.

Physical nexus means a business’ presence in Arizona. This includes, but is not limited to, storefront, people or equipment located in Arizona.

Economic nexus means a business’ gross proceeds of sales or income derived from sales into Arizona exceeds the required economic thresholds. Click HERE for threshold matrix.

No. Once physical nexus is established, the remote seller thresholds do not apply and the gross income on direct sales into Arizona is subject to TPT. In that case, you are considered an Arizona retailer.

1. If the assets or property are in Arizona and you have control over where and how it is stored, you likely have physical nexus.
2. If your business comes to Arizona to conduct taxable business activity, regardless of the duration, you likely have physical nexus.
3. If your business conducts other business-related activities in Arizona that are of an ongoing nature, you likely have physical nexus.

Not likely. Temporarily storing property with a third-party fulfillment center over which you have no control likely does not rise to the level of physical nexus. Click HERE for nexus determination.

A retailer establishes physical nexus (presence) within Arizona by activities performed in the state or on its behalf that are significantly associated with their ability to establish and maintain a market in this state for its sales. Activities and factors that, by themselves or in conjunction with others, establish a retailer’s physical presence within Arizona include the following:

1. The retailer maintains an office or another place of business within the state of Arizona, regardless of whether such location performs a sales-related or other business function.
2. The retailer owns or leases real or personal property in Arizona.
3. The retailer maintains an inventory of products in Arizona at its direction and control.
4. The retailer’s merchandise or goods are delivered into Arizona on vehicles owned or leased by the retailer and the retailer makes such deliveries into Arizona on an ongoing basis.
5. Other local activities performed by the retailer’s employees, agents, representatives, contractors, or affiliated persons in Arizona that enable the retailer to maintain and improve its name recognition, market share or sales volume, goodwill, and individual customer relations may establish physical presence if the activities are not transitory. Such activities may include: soliciting sales through an ongoing local marketing contract; delivering, installing or repairing property sold to customers through an ongoing contract with either the customer or a local partner; or conducting training or similar support services for customers or employees or representatives of the retailer on an ongoing basis.

A retailer having a physical presence within Arizona, as described above, shall be considered liable for transaction privilege tax as a taxpayer located within Arizona.

No, transitory (short-term) activities performed in Arizona do not create physical nexus. Note: A retailer’s activities in Arizona are not transitory if such activities generate gross receipts, are ongoing and are regularly conducted within Arizona. Additionally, a retailer’s activities in Arizona are not transitory if such activities generate gross receipts and the retailer regularly conducts the same business outside Arizona.

If you are not otherwise engaged in taxable business activity, i.e., you are not generating gross receipts for your business while attending the business meeting or conference, you would not establish physical nexus, regardless of the duration of the stay.

No, your assistance is not ongoing and is conducted from outside the state. However, you may have economic nexus if you otherwise meet the established thresholds.

No, although the activity is ongoing, the services are conducted from outside the state. However, you may have economic nexus if you otherwise meet the established thresholds.

Yes, you likely have physical nexus with Arizona, as your sales activities are ongoing and conducted within Arizona. You should pay TPT on all sales into Arizona as a retailer located in Arizona.

No, the vacationing employee’s activities likely do not alone establish physical presence. The employee’s activities are not significantly associated with your ability to establish and maintain a market in Arizona for its sales.

No, these activities do not establish physical nexus since they are not activities related to establishing or maintaining a market in Arizona. However, if your company otherwise meets the economic nexus thresholds it will be required to report TPT on sales to Arizona customers.

If you make any sales at the trade show and you usually make similar sales outside Arizona, your activity is not considered transitory and you will need a seasonal TPT license. Additionally, you will need to pay TPT on all sales made at the trade show. Your physical nexus will end when you leave the state and you may cancel your TPT license after you report all sales from Arizona customers for the month during which you were present at the trade show. If after you return to your home state, you continue to sell to Arizona customers, and you subsequently meet the threshold requirements for economic nexus, you should contact the ECCO team to update your license. The sales at the Arizona trade show do not count towards the threshold.

No, you are considered a temporary retailer and must pay TPT while making sales within Arizona (at a trade show). These sales are not used as a determining factor in calculating your economic threshold.

If you terminate your physical presence in Arizona (for example, you were here for a two-day trade show and have returned home), you should report and remit TPT for all transactions occurring on or before the last day of the month in which you have terminated your physical presence. You may be subject to Arizona’s economic nexus rules if your sales meet the thresholds.

The threshold is computed based on the prior and current calendar year sales into Arizona. For further explanation, click HERE for the threshold matrix.

All affiliated businesses’ gross proceeds are aggregated for purposes of determining the threshold for each of the affiliated businesses. If the affiliated businesses’ combined gross proceeds of sales into Arizona meet or exceed the threshold, each affiliate must be licensed and report on their sales even if they may not individually meet the threshold. Affiliated businesses may file individual or consolidated returns.

An affiliated person/business is when a person or business has a direct, or indirect, ownership, or relationship in another person or business of more than 5%. Please see Arizona Revised Statutes § 42-5043(F).

Remote sellers and marketplace facilitators may obtain an Arizona TPT license at AZTaxes.gov. The state fee for obtaining the license is $12.

The TPT license is valid for the calendar year in which it is issued. It must be renewed annually in January if the remote seller or marketplace facilitator meets the threshold requirements in the current or prior calendar year. There is no fee to renew the license.

You may cancel your license if you do not meet the threshold for the current and prior calendar year. Please see the threshold matrix.

When you file your last TPT return select or check “cancel TPT license” and provide a reason for cancellation. You may also cancel your license by filing a Business Account Update form and specify the reason for cancellation. Please see TPT Cancellation.

Please contact the E-Commerce Compliance and Outreach (ECCO) team by phone: 833-293-7253 (833-AZeSale) or by email: [email protected]. 

Yes, once a remote seller or marketplace facilitator makes direct sales into Arizona, they are subject to audits by the department.

Yes, there are late-filing penalties and late-payment penalties and possible interest for any unpaid tax liabilities.

Generally, liability relief may be available to marketplace facilitators for errors, other than sourcing, made by the marketplace seller that result in failure to pay the correct amount of TPT. Remote sellers may receive liability relief as well. Please see Arizona Revised Statutes § 42-5043 or the Liability Relief page.

Complete the Penalty Abatement Form and submit to the Penalty Review Unit (PRU). Documentation that supports the basis of your request must be included. Requests without supporting documentation may be denied. See additional information here.

The address a marketplace facilitator should look up will vary depending on whether the marketplace facilitator is located in or outside Arizona. 

• For marketplace facilitators located in Arizona, sales should be reported using: (a) the tax rates and codes of the marketplace facilitator’s location in Arizona, if the order information is received in Arizona, and (b) the tax rates and codes of the customer’s address, if the order information is received outside Arizona. 
• Sales made through a marketplace facilitator outside Arizona are sourced to the shipping address of the consumer.  If there is no shipping address, the sale is sourced to the customer’s billing address. 

Remote sellers should report taxes on sales to Arizona customers to the customer’s shipping address.  If there is no shipping address, the taxes should be reported to the customer’s billing address (A.R.S. § 42-5040). 

Use the physical address, or if the shipping address is unknown, the billing address, the Map Locator link can be used to find the location. Select the appropriate business description and the state/county and city TPT rates along with the business codes needed to report gross receipts, which will be displayed.

Internet Explorer, Chrome and Firefox currently support this feature.

Arizona Transaction Privilege & Use Tax Rate Look Up Tool