Arizona Taxes for Business

Arizona Taxes for Business 2016-12-18T16:43:14+00:00

arizona taxesE-Business Services. To better serve you, the Department of Revenue (DOR) offers businesses the opportunity to complete the Joint Tax Application online at www.AZTaxes.gov. Once the license registration is completed and the business is registered to use the site, businesses may file and pay their transaction privilege, use, and withholding taxes online.

Arizona Commerce Authority Small Business Services has a free online Checklist Program designed to help you navigate quickly and easily to information on what you need to know, who you need to contact, and where you need to go to license your business in Arizona. It also includes contact information to statewide resources and assistance to accelerate your business growth. Visit www.azcommerce.com/smallbiz.

Bingo Tax Licenses are required of, and tax is imposed on, bingo operators within the state. For information, contact the DOR, Bingo Section.

City Privilege Tax is generally imposed throughout the state. The DOR collects the tax for most cities; therefore, no additional license application is necessary. Businesses pay the license fee for cities in which they do business, in addition to the applicable state license fees. Please note that some of the cities license and collect their tax independently. Please see the Arizona State, County, and City Transaction Privilege and Other Tax Rate Tables for the tax rates. This form also lists the cities that license and collect their tax independently. There are some differences between the state and local authorities in the taxability of transactions. For questions regarding taxability and licensing, contact the agency responsible for collecting the tax. Fees for city licenses vary.

Corporate Annual Report filing and registration with the Corporation Commission are required for all profit and non-profit corporations. Contact the Corporation Commission for details.

Corporate Income Tax for a taxable year is 6.968% of taxable income or $50, whichever is greater.

  • Estimated tax payments are required if the taxpayer’s Arizona income tax liability for the taxable year is $1,000 or more.
  • Electronic Funds Transfer (EFT) is the required method of payment for corporate estimated tax payments if the taxpayer’s Arizona income tax liability for the preceding taxable year was $20,000 or more. Requirements for completion of the department’s authorization agreement and for voluntary participation in the EFT program are the same as for transaction privilege tax listed in this publication. NOTE: Taxpayers required to make corporate estimated payments via EFT that fail to do so will be subject to a penalty of 5% of the amount of the payment not made by EFT. See ARS § 42-1125(O).
  • Tax return due date. A corporate income tax return must be filed with the DOR. The return is due by the 15th day of the fourth month following the close of the taxable year for regular (“C”) corporations. For “S” corporations, taxes imposed are due on the 15th day of the third month following the close of the taxable year.
  • Delinquent tax returns and payments, except estimated tax payments, are subject to the same penalties and interest as for transaction privilege tax listed in this publication. Late or underpaid estimated tax payments are subject to underpayment penalty and interest. The underpayment penalty is equal to the interest that would accrue on the amount not paid for the period of underpayment, not to exceed 10% of the amount not paid.

Sole proprietors report business income on the Arizona Individual Income Tax Return. The starting point for an individual is the individual’s federal adjusted gross income. The individual must complete his or her federal return before beginning the Arizona return. Individuals whose Arizona gross income exceeds $75,000 may be required to make estimated income tax payments.

License and Registration may be obtained by using the Arizona Joint Tax Application (Form JT-1) to apply for Transaction Privilege Tax, Use Tax, and Employer Withholding and Unemployment Insurance. The application is called “joint” because it is used by both the Departments of Revenue and Economic Security. It allows you to apply for any of the listed licenses and registrations on a single application. The application is available at our website. To apply for other types of licenses that are issued by state agencies, contact those agencies directly. Remember that many cities require businesses to obtain annual permits in order to conduct business within the city limits. Some people who are required to obtain a permit may not be required to obtain a license for transaction privilege tax.

Luxury Tax – Liquor requires wholesalers, microbreweries, and domestic farm wineries to file a return each month and remit luxury tax on spirituous, vinous, and malt liquors. Forms may be obtained from the DOR Comptroller’s Office. Restaurants, bars, and any other businesses planning to sell alcoholic beverages (retail and wholesale) must be licensed by the Arizona Liquor License and Control Department.

Luxury Tax – Tobacco applies to businesses wholesaling cigarettes, cigars, or other tobacco products. Anyone who manufactures, produces, ships, transports, or imports into this state or in any manner acquires or possesses cigarettes without stamps or other tobacco products upon which taxes have not been paid, for the purpose of making the first sale, must be licensed. The license fee is $25 and is renewed annually.

Partnerships doing business in Arizona must file Arizona Form 165 to determine what partnership income is subject to Arizona income tax. Each partner is subject to Arizona income tax on his or her pro rata share of partnership income.

Personal Property Tax is reported to your local county assessor’s office. Businesses must list all personal property (other than motor vehicles) used in the business. Please contact your county assessor for more information.

Taxpayer Bonding may be required in some cases. For details, please see the Taxpayer Bonds publication, available at our website.

  • Delinquent taxpayers may be required to post bonds to protect the state against failure to pay transaction privilege tax or withholding based on the current or previous tax liability.
  • Contractors must be bonded prior to issuance of the transaction privilege tax license unless previously licensed or employing in this state with a good record of tax filing and payment, or if there is no potential tax liability on the proposed project. The type of contracting activities performed determines the amount of bond required. In addition, out-of-state and new contractors must submit bonds for each construction project valued at more than $50,000 prior to the issuance of building permits. Contractors may qualify for exemption from the bonding requirements. Please see the bonding publication for details regarding exemptions. Due to the bonding requirements noted above, license applications for contractors can not be completed online. Once the license and bonding requirements have been met, contractors can then register to use www.AZTaxes.gov to file and pay their taxes.

Transaction Privilege Tax (TPT) is imposed on the seller for doing business in the state, although the tax may be passed on to the customer. Various business activities are subject to transaction privilege tax and must be licensed. Those activities include retail sales, restaurants/bars, hotel/motel (transient lodging), commercial lease, amusements, personal property rentals, contracting, contracting – owner/builders, severance (metal mining), transporting, nonmetal mining, job printing, publishing, utilities, communications, and private (rail) car. A transaction privilege tax license must be issued for each location at which business is conducted. 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). Use the Arizona Joint Tax Application to apply for your transaction privilege tax license. The cost for each license/location is $12.

Tax rates vary by city and county. Please see the Arizona State, County, and City Transaction Privilege and Other Tax Rate Tables for details.

Reporting sales. When filling out the tax return (TPT-1), the gross income from the business must be reported. Tax exempt sales, such as subcontracting business and sales for resale (wholesale), may be deducted.

Use tax must be reported and paid on merchandise purchased as an exempt sale for resale that is subsequently used by the business and on purchases from an out-of-state vendor for use in Arizona. The use tax is reported on the TPT-1 under business class code 030 for items removed from inventory and under business class code 029 for purchases from out-of-state vendors. Transaction privilege tax and use tax are complementary taxes; only one of these taxes can be applied to a given transaction.

When reporting transaction privilege tax, remember to file all tax returns whether or not you have any sales.
Changes that affect the transaction privilege tax license

  • Changes in ownership require a new license because licenses are not transferable. Use the Arizona Joint Tax Application to apply for a new license if your business changes from a sole proprietorship to a partnership or corporation, or undergoes a similar change in organization. Also, if the business is a partnership and partners are added or removed, a new license is required.
  • Changes in location or business location do not require a new transaction privilege license number. When locations are added or there are changes in the business name (or DBA) the license number does not change; however, a new license is printed showing the updated information. License fees are required whenever these changes are made and the business receives a new print of the license.
  • Other business changes that should be reported to the Department of Revenue include changes in the mailing address or location of audit records, requests to suspend licenses when the business plans to temporarily cease operations, and requests to change filing frequency. These changes do not require a license fee.

Due Dates. All businesses are required to report on a monthly basis, unless specifically authorized to report less frequently by the DOR. Businesses with an annual tax liability between $500 and $1,250 may be permitted to report on a quarterly basis; those with an annual tax liability of $500 or less may be permitted to report annually. If the tax liability subsequently increases beyond the criteria mentioned above after a business has been authorized to report less frequently, the business must begin reporting and paying the tax at the appropriate frequency; otherwise, penalties and interest will accrue for late reporting and payment. New business licenses may qualify for monthly or quarterly filing based on the anticipated annual income for your first twelve months of business. The due date for the TPT-1 return is the 20th of the month following the month of the TPT activity. However, the mailed return will be considered timely if it is postmarked on or before the 25th of the month or received by the department on or before the next to last business day of the month. Returns and payments from businesses required to pay via electronic funds transfer (EFT) or who use AZTaxes.gov to file and pay their transaction privilege tax must also be received by the second to the last business day to be timely.

Estimated transaction privilege taxes must be paid each June by all businesses with an annual tax liability of $1,000,000 or more.

Electronic Funds Transfer (EFT). Transaction privilege tax and use tax taxpayers with a prior calendar year liability of $1,000,000 or more are required to remit payments via EFT. Before payments are made via EFT, the Authorization Agreement for Electronic Funds Transfer (ADOR 10366) must be completed and submitted to the department’s EFT Unit. The department will send a confirmation of the taxpayer’s enrollment in the EFT program along with further payment instructions. Taxpayers not meeting the mandatory level of participation are allowed to enroll in the program.

Penalties are 1/2% per month or part of a month for late payment and 4 1/2% per month or part of a month for late filing, up to a combined maximum of 25%. Interest accrues on delinquent payments at the same rate as charged by the IRS and, by law, cannot be waived.

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