Arizona TPT-1 Form/Accounting Credit

Posted on September 21 2010 by admin

The accounting credit is one item on the sales tax return that is often miscalculated or even sometimes forgotten.  The following is a description of the credit as seen in the instructions of the sales tax return.

The State of Arizona provides a credit for accounting and reporting expenses.  The accounting credit is applicable only to state Transaction Privilege Tax or Severance Tax; it does not apply to city, county or other taxes.  (See Table 1 of the TAX RATE TABLES for the state business classes eligible for the accounting credit.)  The Department allows this credit to taxpayers who file and pay their transaction privilege taxes timely and in full.  If these conditions are not met, the accounting credit will be disallowed.

The accounting credit rate for your classification should be preprinted on the form.  If you are preparing a blank form, you can find the accounting credit rates in Table 1 of the TAX RATE TABLES.  The credit rate for retail sales is .056%.  The accounting credit is calculated by multiplying the accounting credit rate by the net taxable amount.  The credit cannot exceed $10,000 for a calendar year.  [See A.R.S. section 42-5017 and Arizona Administrative Code (A.A.C.) Rule R15-5-2007 for more information.]

A business entity which files a single Arizona income tax return that includes income from more than one transaction privilege tax license should file form 51T – Election for accounting and reporting expenses credit with the Department of Revenue if it is expected that the credit for accounting and reporting expenses for all transaction privileges tax licenses will meet or exceed the $10,000 amount for the calendar year.  This election form should indicate how the credit will be allocated among the licenses.

One of the reasons this credit is sometimes miscalculated is the format of the TPT-1 form.  The accounting credit rate is next to the total tax amount on the form.  Sometimes the preparer applies the rate to the total tax amount instead of the net taxable amount.  This results in a lower accounting credit.  Several years ago I noted this mistake on a couple of clients.  Because the clients had not exceeded the $10,000 threshold we were able to go back and amend the sales tax return for the additional accounting credit.

Remember to carefully check the calculation of the accounting credit.

Kane Lavin, CPA

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