Arizona Sales Tax Nexus Requirements for Businesses

Businesses selling to customers in Arizona are subject to a Transaction Privilege Tax (TPT). This is a tax on the vendor for the privilege of doing business in the state, but it is common practice to pass this cost to the customer, making it function like a sales tax. A business must obtain a TPT license if its activities create a connection, known as nexus, with the state, which triggers the tax obligation.

Determining Nexus in Arizona

A business establishes nexus with Arizona through either a physical presence or by meeting an economic threshold. Physical presence occurs if a business has a tangible footprint in the state, such as an office or warehouse. Storing inventory in Arizona, even in a third-party fulfillment center, also constitutes a physical presence. Other activities that create a physical tie include having employees or representatives in the state for more than two days per year or making deliveries using company-owned vehicles.

The second pathway is economic nexus, which applies to remote sellers without a physical location in Arizona. Following the South Dakota v. Wayfair decision, economic nexus is triggered when gross sales to Arizona customers exceed $100,000 in the current or previous calendar year. This calculation is based on gross revenue, not just taxable sales, and excludes sales made through a marketplace facilitator that is already collecting the tax. Arizona’s economic nexus is determined solely by sales revenue, not by the number of individual transactions.

Required Information for TPT Registration

To apply for an Arizona TPT license, a business should gather the following information:

• A Federal Employer Identification Number (FEIN) or a Social Security Number (SSN) for sole proprietors.
• The full legal business name and any trade or “Doing Business As” (DBA) name.
• Physical and mailing addresses and primary contact information.
• The legal structure of the business, such as a corporation, LLC, or partnership.
• Names, titles, and SSNs of principal officers, owners, or partners.
• The North American Industry Classification System (NAICS) code that best describes the primary business activity.
• The date business activity began in Arizona, which is when nexus was first established.
• Bank account details, including routing and account numbers, for setting up tax payments.

The TPT Registration Process

The most efficient registration method is through the state’s online portal, AZTaxes.gov. The initial step is creating a user account, which will serve as the hub for all future TPT filings and payments. Once logged in, you can begin the electronic application and enter the required business information.

For those unable to use the online portal, a paper application is available by completing Form JT-1, the Arizona Joint Tax Application, and mailing it. The online method is preferred by the Arizona Department of Revenue and results in faster processing times. After submitting the application, the business will receive its official TPT license number upon approval, which is required for all subsequent tax filings.

Ongoing Compliance After Registration

After registration, ongoing compliance involves collecting the TPT from customers on all taxable sales. Businesses must apply the correct tax rate, which is a combination of the state’s 5.6% rate and any applicable local rates from counties and cities. The total tax charged depends on the customer’s location, as local rates vary across the state.

Businesses must then report and remit the tax to the Arizona Department of Revenue. The filing frequency—monthly, quarterly, or annually—is assigned by the department based on the business’s estimated annual tax liability. Tax returns and payments are due on the 20th day of the month following the end of the reporting period. These ongoing filings and payments are managed through the same AZTaxes.gov portal used for registration.