Owning a business in Arizona means juggling a lot of moving parts—and handling sales tax is a constant one. Whether you run a restaurant, salon, retail store, or another brick-and-mortar business, having a clear grasp of Arizona sales tax rules is key to staying compliant and stress-free. Here’s a look at the essential sales tax basics every Arizona business owner should understand.
What is sales tax in Arizona?
Although often called a sales tax, Arizona’s Transaction Privilege Tax (TPT) is actually a tax on the vendor for the privilege of doing business in the state. Different business activities fall under TPT, and any business engaging in these activities must hold the proper license.
What is the Arizona sales tax rate?
The Arizona sales tax rate is a blended rate of state, county, and city taxes. The current state of Arizona sales tax rate starts at 5.6%, with local municipalities adding their own rates. Therefore, the final rate will always be higher, in some cases as high as 11.2%.
For example:
- Phoenix: City TPT of 2.8% + Maricopa County TPT of 0.7% → total combined rate 9.1%
- Chandler: City TPT of 1.5% + Maricopa County TPT of 0.7% → total combined rate 7.8%
- Tempe: City TPT of 1.8% + Maricopa County TPT of 0.7% → total combined rate 8.1%
Visit Arizona’s Tax Look Up page to find your rate based on your location.
How to calculate sales tax in Arizona?
Calculating sales tax in Arizona starts with the state rate of 5.6%, but that’s only part of the equation. You’ll also need to add in the county and city rates where the sale takes place. For example, if you’re selling in Phoenix, the total rate combines the 5.6% state tax, Maricopa County’s rate, and the city of Phoenix’s rate, adding up to a much higher total than just the state portion alone.
Use our sales tax calculator
To quickly determine how much you owe, use our sales tax calculator. Simply plug in the total correct rate and your total sales for the filing period.
Are all goods taxable in Arizona?
Not all goods are taxable in Arizona. Certain items, like groceries and prescription medications, are exempt from state sales tax. Other items, such as alcohol, pet food, or vitamins, are fully taxable. Some exemptions also apply to specific services. Keep in mind that local jurisdictions may impose additional taxes on these items, so it’s important to check both state and local rules to ensure accurate collection.
Are all services taxable in Arizona?
Most services are exempt from Arizona’s Transaction Privilege Tax. Whether a service is taxable depends on the type of activity performed. For example, some repair or installation services may be taxable, while professional services like legal or accounting work typically are not. Always check the Arizona Department of Revenue’s guidance to confirm which services require TPT.
How do I know what’s taxable in Arizona?
In Arizona, understanding what’s taxable depends on the type of sale and the business classification. For retailers, a retail sale generally means selling tangible personal property, like clothing, vehicles, digital images, or handmade items, where the customer takes ownership for a single fee. Retail sales can happen online, in stores, at pop-up markets, or even through home sales, and the seller can be an individual, a wholesaler, or a business.
However, not all sales are considered retail. Some business activities fall under different TPT classifications, such as restaurants or service providers. Each classification has its own rules, deductions, and exemptions, so it’s essential to identify which classification your business activity falls under. Reviewing the Arizona Department of Revenue retail sale guidance helps ensure your sales are reported correctly and keeps your business compliant.
Who pays sales tax in Arizona?
In Arizona, the seller is responsible for collecting the Transaction Privilege Tax (TPT) from customers, but the cost is typically passed on to the buyer. This means while businesses remit the tax to the state, the consumer ultimately pays the tax as part of their purchase price.
What are businesses responsible for?
In Arizona, business owners must collect Transaction Privilege Tax (TPT) at the point of sale and remit it to the Arizona Department of Revenue (ADOR). Staying compliant means registering for a license, collecting the correct rate, filing returns, and paying on time.
To encourage timely filing, Arizona offers an accounting credit when you submit your TPT returns:
- Paper filings: 1% credit, capped at $10,000 annually
- Electronic filings: 1.2% credit, capped at $12,000 annually
To qualify for the higher 1.2% rate, you must file all of your TPT returns electronically for the entire year. This credit applies only to the state portion of TPT and does not extend to local TPT.
Check out our full guide on sales tax vendor compensation to explore all the states that offer filing discounts.
Make your sales tax less taxing with DAVO.
When are Arizona sales taxes due?
Arizona’s Transaction Privilege Tax (TPT) filing due dates work a little differently than in many other states. Instead of falling on the same date every month, deadlines vary depending on your business volume and whether you file by paper or electronically. Typically, paper returns are due sooner than electronic filings.
Your filing frequency is based on your estimated annual tax liability:
- Annual: Less than $2,000
- Quarterly: $2,000 – $8,000
- Monthly: More than $8,000
- Seasonal: Businesses operating 8 months or less per year
You can also request to change your filing frequency if your business circumstances shift.
Because Arizona’s due dates aren’t always the same each month, it’s important to track them carefully. You can always confirm the latest deadlines on the Arizona Department of Revenue website.
Keeping up with Arizona’s shifting due dates can feel overwhelming, especially when you’re focused on running your business. DAVO by Avalara takes that stress off your plate by automatically setting aside the sales tax you collect each day, filing your TPT returns on time, and paying the state in full. With DAVO, you don’t have to mark your calendar or worry about missing a deadline. Everything happens seamlessly in the background, so you can stay compliant without the hassle.
How do I know how much sales tax to charge in Arizona?
In Arizona, sales tax rates aren’t one-size-fits-all. They’re made up of the state rate plus county and city rates, which vary depending on where your business is located (and sometimes even where the sale takes place).
The Arizona Department of Revenue provides a tax rate table that breaks down rates by city, county, and type of business activity. This is your go-to resource for calculating the right rate. While other websites may list sales tax rates, they’re often out of date or incomplete. To avoid mistakes, always double-check against the official Arizona Department of Revenue website.
At the end of the day, it’s the business owner’s responsibility to make sure the correct sales tax is charged. Staying current with these rates helps you remain compliant and avoid penalties.
How do I collect sales tax in Arizona?
Before you can start collecting Transaction Privilege Tax (TPT), your business must register with the Arizona Department of Revenue (ADOR) and obtain a TPT license. This applies whether you’re selling from a physical location, online, or through other sales channels in the state. Once registered, you’ll need to calculate the correct TPT for each sale.
Where does the sales tax money go?
In Arizona, the Transaction Privilege Tax doesn’t all go to one place. Instead, the money is collected by the Arizona Department of Revenue and then distributed among the state, counties, and local municipalities. A portion goes into the state’s General Fund to support public services like education, while counties and municipalities use their share to fund local services, infrastructure, and community projects. Because each locality can set its own rate, the total tax you collect will vary depending on where your business (or your customer) is located.
How do I manage tax-exempt sales in Arizona?
If your business sells to customers who are exempt from paying sales tax, such as nonprofits, government agencies, or certain resellers, you’re responsible for making sure their purchase really qualifies. In Arizona, exempt buyers must provide a valid exemption certificate or Arizona Form 5000, depending on the situation.
As the seller, it’s your job to collect and keep these certificates on file in case the Arizona Department of Revenue ever audits your business. If you don’t have proper documentation, you could be held liable for the tax, plus penalties and interest.
The safest approach is to double-check each certificate for accuracy and expiration dates and store them securely. That way, you can confidently make exempt sales without risking unexpected tax bills later.
What if I forget or can’t make my sales tax payment?
Missing a TPT payment can be costly. Arizona imposes penalties and interest on late payments that can quickly add up. There’s a penalty for failing to file and a separate penalty for missing a payment.
- Late Filing Penalty: 4.5% of the tax due per month (or fraction of a month) that the return is late. Minimum $25, maximum 25% of the tax due or $100 per return, whichever is greater.
- Late Payment Penalty: 0.5% of the tax owed per month (or fraction of a month) until the payment is made, up to a maximum of 10%.
Interest also accrues on any unpaid tax from the original due date until the balance is paid in full. If sales tax goes unpaid, states will seize the assets of the business or owner and auction them off to pay the debt. In extreme cases, owners will be prosecuted and sent to jail. Even if the business closes, sales tax is a personal liability that will follow the owner until paid. You can find more details on penalties on the Arizona Department of Revenue website.
How DAVO can help with Arizona sales tax
Ever miss an Arizona state sales tax payment? Or pay it late? Ever worry about having enough money set aside to pay your Arizona sales tax, or wonder why you’re paying so much for a bookkeeper?
If so, DAVO is for you. It’s designed for brick & mortar business owners in Arizona—folks who run restaurants, salons, spas, and retail shops—who have better uses of their time than collecting, paying, and filing state sales tax. We’ll take care of the sales tax. DAVO helps automate every step of the Arizona sales tax process—from collecting to filing to paying. It works seamlessly with your POS and is quick to get started with. And because DAVO guarantees your taxes will be paid on time and in full, there’s less to stress about.
Choose your POS system to get started with DAVO.
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