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2016 Changes in Arizona Transaction Privilege Tax

Posted Nov 23, 2015

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With January 1, 2016 around the corner we would like to inform you of changes in Arizona transaction privilege taxes that will occur in the New Year.

One major element of the TPT Simplification laws that was supposed to occur on January 1, 2016 was that privilege taxes for all cities and towns were to be filed with and paid to the Arizona Department of Revenue. This was to include “non-program” cities such as Tucson and Phoenix, which are currently receiving tax returns and payments for city privilege taxes directly.

The Arizona Department of Revenue has informed us this change will not occur on January 1, 2016, but will be pushed out to a later date in 2016. We recommend checking the Arizona Department of Revenue’s website as well as their social media outlets and newsletters for the announcement of the new effective date. Their website can be found at https://www.azdor.gov/Business/TransactionPrivilegeTax.aspx.

Another change to occur is the new transaction privilege and use tax rate for the City of Phoenix, effective January 1, 2016. This change has split Retail Sales, Use Taxable Purchases and Use Tax – Out of State Vendors into two levels. Level one will still be recorded under business activity codes 17, 29 and 31 respectively, for values equal to or less than $10,000 per single item before taxes, add-ons or sales price adjustments. These sales will be taxed at the new rate of 2.3 percent.

For values that exceed $10,000 per single item, level two will split Retail Sales, Use Taxable Purchases and Use Tax – Out of State Vendors and the amount over $10,000 will be filed under business activity codes 33, 34 and 35 respectively and taxed at the current rate of 2.0 percent.

Any transactions prior to January 1, 2016 should be collected and reported at the current rate of 2.0 percent. Construction contractors, speculative builders and owner-builders will be taxed under the old rate for contracts executed or agreements signed prior to January 1, 2016.

As always, please feel free to contact us if you have any questions on these items or any other sales tax issues.





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