Does Arizona charge sales tax on services?

by Sarah Craig July 5, 2023

The majority of U.S. states require merchants to charge sales tax on tangible personal property (TPP), otherwise known as physical goods. Many states also implement sales and use tax on digital goods and SaaS. Because the economy has shifted over time from a manufacturing economy to a service economy, states are now looking to generate revenue by taxing services.

If you are doing business in Arizona, you’ve likely seen the term transaction privilege tax (TPT). Although commonly referred to as a sales tax, the Arizona transaction privilege tax (TPT) is actually a tax on a vendor for the privilege of doing business in the state. This tax is essentially Arizona’s version of a sales and use tax and is handled similarly to sales and use tax in other states. 

Here’s what merchants need to know about taxing services in the state of Arizona, which has a transaction privilege tax rate of 5.6%.

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Does Arizona charge TPT on services?

Services are generally not taxable in Arizona, with the following exceptions:

  • amusements
  • personal property rentals
  • contracting
  • severance (metal mining)
  • transporting
  • nonmetal mining
  • job printing
  • publishing
  • utilities
  • telecommunications
  • private (rail) car

Please keep in mind that this is a guideline, and you should consult with a sales tax professional to determine if the services your business provides should be subject to state sales tax. For an in-depth look at Arizona TPT, TaxJar’s guide to sales tax in Arizona and the Arizona Department of Revenue has more details.

How to stay compliant with sales tax when you sell services

Managing all the moving parts of sales tax can be challenging. Are accounting services taxed? What about hair care or car maintenance? They may not be taxed in your state today, but sales tax laws change all the time. TaxJar makes it easier for you to stay current with it all, especially as you scale your business across states.

If you need to charge sales tax on services, TaxJar takes all of these state laws into account and makes your job simple. To learn more about TaxJar and get started automating your sales tax compliance, start a free, 30-day trial today.

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