Arizona Sales and Use Tax Exemption
The Arizona sales and use tax exemption form is a document that you complete when you need to make a purchase that qualifies for exemption from sales tax.3 min read
The Arizona sales and use tax exemption form is a document that you complete when you need to make a purchase that qualifies for exemption from sales tax. You give this form to the vendor you are buying from. The vendor is responsible for verifying that you meet the qualifications for a tax-exempt purchase.
The form is the legal documentation of the buyer's claim of exemption. It is good only for the period of time shown on the certificate and only for goods purchased for resale. However, Arizona does allow a blanket resale certificate that can be re-used for all exempt purchases from that vendor without the buyer having to complete a new form for each sale.
Retailers buying goods for resale must have the exemption certificate before they can buy tax-free. The exemption certificate should include:
- The date it was generated
- The buyer's signature or his or her agent
- The names and addresses of the seller and the buyer
- The legal reason for the exemption
- The buyer's business license number or tax registration number
- A description of the goods the buyer is purchasing
Most products are taxable in Arizona. For example, if you sell toys in the state, you collect sales tax from your Arizona customers. A few exceptions include some groceries, prescription medicines, medical devices, and machinery and chemicals used in research.
Services, on the other hand, are generally not taxable in Arizona. Freelance writers, plumbers, and graphic designers, for example, don't typically collect sales tax.
The state sales tax rate in Arizona is 5.6 percent, which is lower than average. However, when you add local sales tax rates from the state's 92 local tax jurisdictions, the combined rate is higher than average.
Transaction Privilege Tax
Arizona's sales tax system is somewhat unusual. The terms "transaction privilege tax" (TPT) and "use tax" are used to refer to the taxes a merchant collects and submits to the government. You may hear TPT referred to as sales tax, but it's different from sales tax in most states because it's charged to the seller rather than the buyer.
TPT is an excise tax that vendors must pay for the privilege of doing business in Arizona. It is collected as a percentage of the sale and is submitted to the State. The vendor, not the consumer, is held responsible for paying the taxes. No legal requirement exists for the vendor to pass the tax on to the customer, but most do. This is why most people see it as a sales tax.
If a business has a location in the Arizona or some other connection to the state, then the company needs an Arizona business license. It must collect and remit the transaction privilege tax to the Arizona Department of Revenue on all taxable sales.
The use tax law was enacted in Arizona in 1955. The stated purpose of the law was to "protect sellers in the state of Arizona from inequities that would result without a use tax." Vendors outside of Arizona who do business in the state must collect and submit use tax from their Arizona customers. Vendors outside Arizona who do business in the state must collect use tax from their Arizona customers and remit it. If the buyer doesn't pay sales tax to the out-of-state seller, then Arizona law requires that the buyer pay use tax directly to the State of Arizona.
Types of Forms
The form you use varies depending on the type of tax-exempt purchase you are making. These are a few of the different forms:
- The Arizona Department of Revenue Privilege Tax Exemption Certificate is a general-use document for most products.
- The Transaction Privilege Tax Exemption Certificate for Commercial Enhancement District Projects is used when buying materials for use in a task that enhances that specific type of district.
- The Transaction Privilege and Use Tax Used Oil Burner Exemption Certificate is used when buying used oil.
- The Arizona Department of Revenue Transaction Privilege and Use Tax Overhead Exemption Certificate is used by government contractors buying materials to make, modify, assemble, or repair products. It is also used by subcontractors engaged in the same activities.
- The Exemption Certificate for Electricity and Natural Gas Primarily Used in Manufacturing and Smelting Operations is for purchasing materials related to these ongoing processes.
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