Arizona transaction privilege tax (TPT), commonly referred to as a sales tax, is a tax on vendors for the privilege of doing business in the state. Various business activities are subject to transaction privilege tax and must be licensed.
If a business is selling a product or engaging in a service subject to TPT, that business will likely need a license from the Arizona Department of Revenue (ADOR) and a TPT, or business/occupational license, from the city or cities in which the business has a base or operation.
Businesses with multiple locations or business lines can opt to license and report for each location separately, or have a consolidated license (and report aggregate sales). The cost for each license per location is $12. If the ownership is the same, the locations can be consolidated under one license number to allow the taxpayer to file a single return.
Even vendors who only do business for special events in Arizona are required to have a license. The state license fee remains $12 no matter how many special events a vendor attends. However, a separate city license fee is required for each city unless a vendor is currently licensed for the city in which an event will be held.
Additionally, a vendor who runs a business out of a home must obtain a license and use the home address as the business address on the application. Please note that it is the responsibility of the business owner to research the legality of operating a business in a home and to comply with county and city zoning requirements.
TPT License Certificates cannot be printed online. Please ensure all license and renewal fees have been paid, as licenses will not be delivered until fees are paid in full.
A business code is a three-digit number assigned to a corresponding business activity. Business codes can be found in the Tax Rate Table: (e.g., 017 is the business code assigned to retail business).
City codes identify the cities or towns in which business activities are conducted. A city code is identified by two letters (e.g., the Town of Gilbert’s city code is GB). City codes are listed on the Tax Rate Table, please refer to the rate table for the city code.
Location codes are unique, three-digit numeric codes that are tied to business addresses where the business transactions are taking place. This tutorial will introduce you to the location codes that will be used on the new Arizona transaction privilege tax reporting forms.
A region code is used to identify the county and/or the city where business transactions are sourced.
Understanding TPT Licensing
As soon as the businesses commence operations in Arizona, they must register with both agencies at the same time by completing an Arizona Joint Tax Application (Form JT-1/UC-001) and submitting it to the ADOR’s License & Registration Section. The Application is called “Joint” because it is used by both the ADOR and DES. ADOR will then forward a copy to DES, which it will use to determine whether or not a business is liable to pay Arizona Unemployment Insurance (UI) taxes. This form is used to apply for transaction privilege tax, use tax, and employer withholding and UI taxes.
NOTE: Your application cannot be processed if you do not record your Federal Employer Identification Number (FEIN) in the section of the form provided for this purpose. If you do not have a Federal EIN, contact the Internal Revenue Service to apply.
Both ADOR and DES will process the Arizona Joint Tax Application, and each agency will notify the business separately after its processing is completed. If a company is determined liable to pay UI taxes, a “Determination of Unemployment Insurance Liability” (UC-016 or UC-015A) form will be mailed by DES. It will specify the legal basis for liability, the date UI coverage starts, tax rate, and the Arizona UI employer account number (be sure to include this account number on any future correspondence with DES).
ADOR uses a number of research methods to ensure businesses in Arizona are properly licensed for state TPT and use tax and registered as an employer for withholding taxes. This research includes matching names of businesses from various directories or sources against our database.
If a taxpayer is being audited or has trouble making payments, ADOR has highly trained representatives available to assist. ADOR representatives are prohibited from disclosing any tax information except to the taxpayer. However, the taxpayer may select to authorize the disclosure of confidential tax information to an individual or multiple individuals before contacting ADOR for assistance by completing the proper disclosure authorization form.
ADOR views an audit as a cooperative and educational process that promotes voluntary compliance with tax obligations by ensuring taxpayers pay the correct amount of tax. Our trained auditors fairly determine whether the correct amount of tax has been reported and are responsible for performing audits in a professional and courteous manner with minimum disruption to a business.
A voluntary disclosure program is also available if a taxpayer has not fulfilled the transaction privilege tax, use tax, corporate income tax, and individual income tax or withholding tax obligations in Arizona and wants to come into compliance with the filing requirement(s).
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