The tax commonly referred to as a "sales tax" is in reality two distinct taxes. The first is the Transaction Privilege Tax, which is a tax on the privilege of doing business in Arizona. It is measured by the value of tangible personal property sold by the vendor in Arizona. The vendor is liable for the tax, even though the vendor may pass on the tax to the consumer. The second is the Use Tax. The 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 on which no tax was paid to the state of sale. The consumer is liable for the Use Tax, however the vendor is responsible for collecting and remitting the tax to the state as long as nexus is established. If a lesser amount of tax was paid to the state of sale than would have been paid had the property had been purchased in Arizona, the consumer is liable for the difference.
Determining Transaction Privilege/Use Tax Nexus within Arizona:
The following is a general guideline of activities that, if engaged in, may exceed the minimum threshold of nexus and subject the business to the Transaction Privilege Tax, or Use Tax requirements of Arizona:
- Employee present in the state for more than two days per year.
- Ownership or lease of real or personal property in Arizona.
- Maintenance of an office of place of business in Arizona.
- Delivery of merchandise into Arizona on vehicles owned or leased by the taxpayer.
- 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. Examples of establishing and maintaining a market include: soliciting sales; making repairs; collecting delinquent accounts; delivering property sold to customers; installing products; conducting training for employees or representatives of the company or customers; resolving customers complaints; providing consulting services; soliciting, negotiation, or entering into franchising agreements.