Your LLC May Need to Obtain Arizona State & City Transaction Privilege Tax Licenses
If your LLC will be selling a product or engaging in a service subject to Arizona state or local transaction privilege tax, it will most likely need to obtain the state transaction privilege tax (TPT) license from the Arizona Department of Revenue (commonly referred to as a sales tax, resale, wholesale, vendor or tax license) and a transaction privilege tax or business/occupational license from the city(ies) in which the company is based and/or operates.
If you have questions about whether or not your LLC’s business activity is subject to transaction privilege tax/licensing, check with both the Arizona Department of Revenue and the licensing office(s) of the city(ies) in which you will be based and/or operate.
The Arizona transaction privilege tax is commonly referred to as a sales tax; however, the tax is on the privilege of doing business in Arizona and is not a true sales tax. Although the transaction privilege tax is usually passed on to the consumer, it is actually a tax on the vendor.
Arizona transaction privilege taxes are imposed on persons engaged in certain business classifications, including retail sales. What this means is that various business activities are subject to state, county and/or city transaction privilege tax (TPT).
Types of business activities subject to the transaction privilege tax include, but are not limited to: retail sales, restaurants/bars, hotel/motel (transient lodging), commercial leasing, advertising, amusements, personal property rentals, real property rentals, construction contracting, owner/builders, manufactured building, severance (mining, timbering), transportation, printing, publishing, utilities, communications, air/railroad, private cars/pipelines and use tax.
The Department of Revenue collects the tax for the counties and most cities, however, some of the cities license and collect their tax independently. Tax rates vary depending on the type of business activity, the city and the county.
There are some differences between the state and local authorities in the taxability of transactions. For instance, the state does not impose a transaction privilege tax on (1) renting, leasing, or licensing for use residential real property, or (2) the sale of advertising. However, many cities do tax these activities.
For questions regarding taxability and licensing, contact the office responsible for collecting the tax (i.e., the Arizona Department of Revenue and/or the local city/town licensing office.)
If your Arizona LLC will engage in an activity that is taxable under the Arizona transaction privilege tax statutes, it must apply for a transaction privilege tax license for each business location before engaging in business.
If the Arizona LLC will pay wages to employees, it must obtain an Arizona withholding number and an Arizona unemployment number.
To obtain a transaction privilege tax license, an Arizona withholding number or an Arizona unemployment number, the Arizona LLC must complete and file an Arizona Joint Tax Application with the Arizona Department of Revenue.
To learn more about Arizona’s TPT, see “Transaction Privilege Tax Frequently Asked Questions.”
For licensing questions on transaction privilege or withholding call the Arizona Department of Revenue at (602) 542-4576 or 1-800-634-6494 (from area codes 520 and 928).
For questions on unemployment tax call the Arizona Department of Economic Security at (602) 248-9396.