In Arizona, businesses must comply with specific licensing and registration requirements for various activities within the state.
If your business is selling a product or providing a service subject to the Arizona transaction privilege tax (TPT), it may need a license from the Arizona Department of Revenue (ADOR). Additionally, you may be required to pay a transaction privilege tax or obtain a business/occupational license from the city (or cities) it is based and/or operates.
What is a transaction privilege tax?
A transaction privilege tax – also known as a sales tax – is a tax imposed on the privilege of conducting specific business activities within a jurisdiction.
However, unlike sales tax, a transaction privilege tax is imposed on the business, not the consumer.
This tax is imposed on the total revenue or gross income generated from business-related activities. Although a business can shift the tax burden to consumers, as with a sales tax, it is ultimately the business's responsibility to report and pay the appropriate tax on its operations.
Who needs a TPT license?
A TPT license is required for most business entities in Arizona and can be obtained from the Arizona Department of Revenue (ADOR).
Business activities subject to transaction privilege tax and required to obtain a TPT license include:
- Retail and sales: Sales, special events, craft shows, and trade shows.
- Rentals and leases: Personal property rentals, Software-as-a-Service (SaaS), and commercial leases.
- Food lodging, and hospitality: Restaurants and bars, hotels and motels, and short-term rentals.
- Construction and extraction: Contracting, severance (metal mining), and non-metal mining.
- Communications and media: Publishing, telecommunications, printing, engraving, embossing, and copying.
- Utilities and infrastructure: Utilities, transporting, and private (rail) car.
Out-of-state retailers, including remote sellers and marketplace facilitators, must obtain a TPT license if their Arizona sales exceed a specified threshold, even without a physical presence in the state.