Arizona - Targeting Sales Tax Simplification

In May 2012, Arizona’s Governor, Jan Brewer signed an Executive Order establishing a Transaction Privilege Task Force in hopes of simplifying Arizona’s tax code in order to reduce taxpayer frustration and improve compliance with the task of filing transaction privilege taxes (aka sales tax).

The task force met monthly over twelve months and reviewed every facet of the transaction privilege tax with tax experts, business owners, municipal representatives, and indirect tax representatives from various Fortune 500 businesses that conduct business in the state.   While there were various renditions of the tax simplification bill produced by the Governor’s Task Force, on Tuesday, June 25^th, 2013, Governor Brewer signed House Bill 2111, Arizona’s Transaction privilege tax (sales tax) simplification bill which will become effective on January 1, 2015.

So what does this mean for taxpayers?  On January 1, 2015, the State of Arizona will become the single point of contact for the administration, reporting and remitting of all state, county, and city transaction privilege tax.  This enhancement will allow taxpayers to file for all jurisdictions on one form and via an upgraded website.

While the state does currently collect and distribute tax for 73 local counties and city municipalities, the 18 “home-rule” cities is often where the headaches lie.  With each home-rule jurisdiction comes the need for a new business license, a check to be cut, and of course another return that taxpayers need to make sure is reported and paid in a timely manner.  With this new law, the state will be collecting all of the liability for all of the county and local municipalities which means a more streamlined approach to registration and filing. Having all of the returns and account information contained on one website will reduce the need to have multiple reports for mailing, multiple checks, and multiple contacts when trying to solve a problem.

It sounds so simple…right?  Just wait, there’s more!  The audit process will be streamlined as well.  Taxpayers who are audited will now have an audit that will be for the state, county and city taxes regardless of whether the taxpayer is registered to file in one or more than one city. 

Here’s some other items that business owners can expect with the change (taken from the AZ DOR website):

• Taxpayers who file for more than one location must e-file their tax return.
• All taxpayers will receive an annual renewal notice this fall from DOR.  If you conduct business in a city that has a renewal fee, you will pay the DOR the renewal fee(s).
• TPT (Transaction Privilege Tax) licenses will be valid for one calendar year. This means you will need to renew your license annually with the DOR.
• If you do not renew your city TPT (Transaction Privilege Tax) license timely, you may be penalized up to $25.
• If your business has multiple locations or under multiple names and files a consolidated tax return, you will be required to pay only one municipal TPT (Transaction Privilege Tax) renewal fee for each jurisdiction.
• If your business operates in multiple locations or under multiple names and does not file a consolidated tax return, you will be required to pay a license renewal for each location in each jurisdiction.
• There will no longer be the e-signature document required when registering on AZTaxes.gov.  This means you will no longer need to mail in a signature card when you register for AZTaxes.gov.

For those of us in the sales tax world, hearing of Arizona making strides to simplify its sales tax registration and collection is exciting– if only other jurisdictions would follow suite (Louisiana…you are up next!). 

At the end of the day, simple is the last word that is usually associated with Sales Tax, however, the efforts that the jurisdictions are going through to bring simplicity to the table will be very much appreciated by sales and use tax professionals nationwide.

For additional information on the state of Arizona and the Sales Tax Simplification Tax Force and new law, you may visit – http://www.azdor.gov/TPTSimplification.aspx