Important Changes to Arizona Sales Tax in 2021

by Jennifer Dunn January 5, 2021

Starting in 2021, the state of Arizona has made a few changes to how they handle Transaction Privilege Tax (TPT – Arizona’s version of sales tax). More taxpayers than ever are required to file electronically, and Arizona taxpayers can now claim even higher sales tax discounts for filing electronically and on time.

Here’s what’s new: 

Most Arizona Taxpayers Now Required to File and Pay Electronically 

Throughout the past few years, Arizona has been requiring more and more TPT taxpayers to file and pay online. Starting in 2021, Arizona TPT and use tax payers are required to file and pay electronically if they meet the following criteria:

  • Annual TPT and use tax liability of $500 or more during the prior calendar year

This amount decreased from $5,000 in annual TPT and use tax liability for tax year 2020. 

Further, tax filers who are used to filing paper TPT-EZ forms will find that Arizona no longer automatically mails those forms out. 

These developments are part of Arizona’s years-long effort to both streamline and simplify TPT tax filing for taxpayers collecting in Arizona

And the state is not messing around. According to the Arizona Department of Revenue, penalties for filing on paper include the following:

  • A penalty of 5% of the tax amount due for filing a paper return. The minimum penalty is $25, including filings with zero liability.
  • A penalty of 5% of the amount of payment made by check or cash.
  • A penalty of 4.5% of the tax required to be shown on the return for each month or fraction of a month the return is late. There is a minimum of $25 and a maximum of 25% of the tax due or $100 per return, whichever is greater.

To file Arizona TPT and use tax returns, visit AZTaxes.gov.

Transaction Privilege Tax License Renewals Due

If you are registered with the state of Arizona you should have received a TPT renewal notice in the mail. 

Unlike most other states, Arizona TPT licenses must be renewed annually. The deadline to renew is January 1, 2021. According to the Arizona Department of Revenue, failure to renew will include penalties and/or late fees.

And renewal comes with a fee. While the state of Arizona itself does not charge a state “renewal” fee. For a new TPT license issued by ADOR, the cost is $12 plus applicable city fees of up to $50 per jurisdiction.

Out-of-state businesses without a physical presence in Arizona must renew their TPT licenses if they have more than $100,000 in sales to Arizona customers in the current or prior calendar year. Learn more about economic nexus in Arizona here.

Taxpayers can renew online at AZTaxes.gov and navigate to the “License Renewal” section of the website after logging in.

Arizona’s Increased Accounting Credit

Arizona has always allowed taxpayers who file TPT on time to claim a sales tax credit. In the past, but the “accounting credit” meant that taxpayers could claim 1% on up to $10,000 of TPT paid throughout the calendar year.

This year, though, the credit has increased. Taxpayers can now claim up to 1.2% on up to $12,000 in TPT paid throughout the calendar year.

This is a great reminder to be sure to take your TPT and other sales tax discounts. Need help with TPT filing? TaxJar AutoFile is totally compliant with Arizona’s electronic TPT filing requirements and always takes your discounts and credits into account so you keep that money in your business’s bank account. Find out more, and six other reasons to AutoFile your sales tax returns, here.

Do you have questions or something to say about Arizona transaction privilege tax filing in 2021? Start the conversation in the comments!

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