TPT Simplification Update
The Arizona Department of Revenue (ADOR) and Arizona’s Cities and Towns continue to work together to achieve the goal of simplifying the manner in which taxpayers report and pay their Transaction Privilege Tax (TPT). Due to the complexity in incorporating the City’s requirements into the Department’s information technology system, ADOR will not be the single point of licensing, filing and payment of all TPT on January 1, 2015, as originally planned. However, taxpayers should be aware that there will be changes to licensing and filing requirements effective January 1, 2015. We are confident these changes will be the first step in making it easier for Arizona businesses to report their State, County and City TPT taxes.
For 2015, taxpayers will continue to file transaction privilege taxes to the state and most municipalities as they do today. Bullhead City, Somerton, and Willcox will become Program Cities as of January 1, 2015 (Program Cities
are the cities for which the ADOR licenses and collects TPT). Taxpayers located in these three cities will report and pay their TPT to the State. The cities of Apache Junction, Avondale, Chandler, Douglas, Flagstaﬀ, Glendale, Mesa, Nogales, Peoria, Phoenix, Prescott, Scottsdale, Sedona, Tempe, and Tucson will continue to administer their own privilege taxes through the 2015 calendar year. Beginning January 1, 2016, ADOR will become the single point of administration and collection of State, county and municipal transaction privilege tax.
Taxpayers who have a state TPT license and/or a municipal excise tax license are required to annually renew the license(s). The license for both the State and the cities is valid for one calendar year and must be renewed by January 1st each year.
Taxpayers will be receiving a notice to renew the State and Program City licenses. Taxpayers must complete and submit this renewal form to the Arizona Department of Revenue even if the taxpayer’s business information has not been changed. There is no fee to renew the State TPT or current Program City license.
However, certain changes to a TPT license are subject to a fee of $12 per location for the State license and any applicable City license fees. The following changes are subject to the $12 State license fee and any city:
- A change to your business name or DBA
- A change in your business location address
- Adding reporting jurisdictions
- Adding business or rental locations
In addition to the Arizona renewal form, taxpayers may receive a separate renewal notice if licensed in the following cities: Apache Junction, Avondale, Chandler, Douglas, Flagstaﬀ, Glendale, Mesa, Nogales, Peoria, Phoenix, Prescott, Scottsdale, Sedona, Tempe, and Tucson. If you receive a renewal notice from one of these cities, it is important that you complete and return all city renewal forms and payment(s) specific to your business to the appropriate jurisdiction(s).
Renewal notices will be sent in the month of November. If you do not receive your notice by December 31, 2014, please call 602-542-5027. It may take up to forty five days to process your renewal.
Filing Frequency Changes
Effective January 1, 2015, if your annual transaction privilege tax liability is less than $2,000, you may file and pay annually; if your annual transaction privilege tax liability is between $2,000 and $8,000, you may file and pay quarterly. Otherwise, your transaction privilege taxes are due monthly. After January 1, 2015 you may call Taxpayer Information and Assistance unit at 602-255-2060 or toll free within Arizona at 1-800-843-7196, if you would like to change your filing frequency.
Due Date Changes
Effective January 1, 2015, for all taxpayers who elect not to file electronically, TPT returns must be received by the Department on or before the second to last business day of the month. If the return is received after the second to the last business day, the return is not timely regardless of the postmark date. This includes returns filed by mail or hand delivered to the Arizona Department of Revenue.
Single source audits will become effective January 1, 2015. This means an audit will be conducted by state trained staff and will include all cities in which you conduct business.
RETAIL CHANGES EFFECTIVE JANUARY 1, 2015
Arizona Revised Statutes (A.R.S.) § 42-5061.A.14 has been amended to limit the exemption for sales of tangible personal property to nonresidents to only apply to the sale of motor vehicles. Therefore, beginning January 1, 2015, sales to a nonresident of tangible personal property, other than a motor vehicle, shipped or delivered to a location outside Arizona for use outside the state, are subject to tax at the seller’s business location.
A.R.S. § 42-5061.A.35 has been repealed effective January 1, 2015. Therefore, beginning January 1, 2015, sales of tangible personal property shipped or delivered directly to a destination outside the United States for use in that foreign country are subject to tax.
Standardized Business Codes
Beginning January 1, 2015, there will be one list of business codes for the State/county and cities. For example, if you currently file under the retail classification at the state/county level (business class 017), you will file business code 017 for the city in which you conduct business in. The rate table
lists all the business codes for all program cities.
Prime Contracting Changes
Effective January 1, 2015, nonconstruction, or service contactors, are exempted from prime contracting on both the state and city levels. Contractors who only enter into contracts with owners of real property to maintain, repair, replace, or alter their property will be subject to tax at the point of purchase on the building materials used in those projects.
All other contracting activity remains taxable under the current statutes.
Contractors who only enter into contracts with owners of real property to maintain, repair, replace, or alter their property are not required to obtain or renew TPT licenses.
If you are a contractor whose only business is to enter into contracts with the owner of real property for the maintenance, repair, replacement or alteration of existing property, beginning January 1, 2015, you do not need to have a transaction privilege tax (TPT) license. Contractors who fall under this category will now pay retail tax at the point of sale when materials are purchased.
To cancel a TPT license complete the Business Account Update form to indicate the effective date of the cancellation. The update form is available in the Forms section for TPT on our website. Or, when filing your final TPT-1 select the box at the top of the form that states, Final Return Cancel License.
Property Management Companies & Residential Rental Property
Property managers and property management companies may no longer obtain a transaction privilege tax (TPT) license on behalf of their clients who own residential property in a Program City that levies a municipal excise tax on residential rentals.
Effective January 1, 2015, each real property owner is required to have a TPT license per location in a Program City that levies a municipal excise tax on residential rentals. To obtain a TPT license, the property owner must apply using the Arizona Joint Tax Application (JT-1).
If a property owner would like a property manager or property management company to file and pay their TPT, the property owner must file a General Disclosure/Representation Authorization Form (aka Power of Attorney, Arizona Form 285) with the Arizona Department of Revenue.
Other things to look for in the upcoming months
- Ability to look up taxing jurisdiction and applicable tax rate by January 1, 2015
- Bulk filing by jurisdiction by January 1, 2015
- New joint tax application (JT-1) with jurisdiction address functionality: July 1, 2015
- Enhanced AZTaxes.gov e-file system: October 1, 2015
- New TPT form for filing monthly TPT returns which will allow taxpayers to report data by business location: October 1, 2015
- Bulk filing capabilities for taxpayers to file by business location: October 1, 2015
- An electronic license renewal process for all taxpayers, including non-program city taxpayers between October and December, 2015