Out-of-state businesses struggle to understand the tax filing requirements in another state. To assist an out-of-state business with these questions, the Arizona Department of Revenue released Pub 623 Nexus in Arizona on its website.
Pub 623 covers the main Arizona business taxes: Transaction Privilege Tax, Use Tax and Corporate income tax. In addition, it includes information about Arizona’s Voluntary Disclosure Program for businesses that find they missed their filing requirement.
Arizona TPT tax (often referred to as a “sales tax”) is a tax on the privilege of doing business in Arizona. The vendor is liable for the tax, though the vendor may pass on the tax to the consumer.
The guide includes the following general guidelines of activities that, if engaged in by an out-of-state vendor with no locations in Arizona, may exceed the minimum threshold of nexus and subject the business to TPT collection requirements of Arizona:
- Employee(s) present in the state conducting business on behalf of the company for more than two days per year.
- Maintenance of an office or place of business in Arizona
- Delivery of merchandise into Arizona on vehicles owned or leased by the taxpayer.
- Ownership or lease of real or personal property in Arizona.
- Independent contractors or other non-employee representatives present in Arizona for more than two days per year for the purpose of establishing and maintaining a market for the taxpayer.
Use Tax is a tax on any tangible personal property bought from an out-of-state vendor that is stored, used or consumed in Arizona and on which no tax was paid to the state of sale.
While the consumer is liable for Use Tax, Arizona imposes a Use Tax collection responsibility on vendors that have sufficient nexus for Use Tax purposes. Arizona instructs vendors to review Transaction Privilege Tax Ruling TPR16-1 for guidance related to nexus for Arizona TPT versus Use Tax purposes.
Additional information related to Corporate Income Tax Nexus and the Voluntary Disclosure Program is also included in Pub 623.
Other information as well as Pub 623 is available on the Arizona Department of Revenue website at www.azdor.gov.
Melinda Nelson, CPA