Several states tax gross business receipts, while the state of Arizona levies a very similar "transaction privilege tax" on the gross receipts of certain businesses. You must obtain a transaction privilege tax license from the Arizona Department of Revenue in order to do business if you fall within one of 16 commercial categories, which in 2011 included retail sales, restaurants/bars, lodging, commercial leasing, amusements, rental of personal property, contracting, construction, metal and nonmetal mining, transportation, printing, publishing, utilities, communications and private railcars.
Calculating Transaction Privilege Tax in Arizona
Obtain a copy of Form TPT-1, the transaction privilege tax reporting form and return. You must use a separate return for each business location.
Use TPT-1 to report gross income from business operations on Section II, Column D. In Column E, deduct from the amount certain sales that are exempt from tax, such as wholesale sales and sales to subcontractors. Enter the taxable amount in Column F, the appropriate tax rate in Column G, and the total tax amount in Column H. You may deduct accounting expenses in Column J.
Report and pay TPT tax by the due date, which occurs on the 20th of each month following the month of reported gross income. If your tax liability is between $500 and $1,250, you may report on a quarterly basis. If your tax liability is less than $500, then you may report annually. If you are a new business, you may report on the frequency for your anticipated income for twelve months. Check the printed due-date calendar on the Arizona Department of Revenue web site to keep current with these dates.
Pay estimated TPT taxes in June if your taxes exceed $100,000 a year. If your tax liability exceeds $1 million per year, you must pay the tax via electronic funds transfer. To carry this out, you must file an Authorization Agreement for Electronic Funds Transfer, available on the Arizona Department of Revenue web site.
The Arizona Department of Revenue collects the TPT on behalf of all counties and most cities, with the exception of "non-program cities," which include Apache Junction, Avondale, Bullhead City, Chandler, Douglas, Flagstaff, Glendale, Mesa, Nogales, Peoria, Phoenix, Prescott, Scottsdale, Sedona, Tempe, Tucson and Wilcox. If you do business in these cities and must pay TPT, contact the city tax division for filing requirements.
The penalty for late filing of the TPT-1 return is 4.5 percent a month on the amount due. The penalty for late payment is 1/2 percent a month. The penalties, combined, cannot exceed 25 percent of the amount due; the state also charges interest at the going IRS rate for late federal taxes.