Sales Tax Obligations of Sellers in Arizona

April 13, 2006

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The items below should help you with the most frequently asked questions concerning sellers and sales and use tax issues.

Procedure for accepting resale certificates. A seller claiming an exemption from transaction (sales) tax must both: (1) mark the invoice indicating the deduction, and (2) obtain an exemption certificate executed by the purchaser indicating the following:

the name and address of the purchaser
the precise nature of the business of the purchaser
the purpose for which the purchase was made
facts necessary to establish the appropriate deduction
the tax license number of the purchaser (to the extent the deduction depends on the purchaser conducting business)
a certification that the person executing the certificate is authorized to do so on behalf of the purchaser

Procedure for accepting blanket certificates. A vendor (seller) and a purchaser may agree to use a blanket certificate. The main purpose of a blanket resale certificate is that both parties can avoid the hassle of having to present a certificate for every transaction The blanket certificate will continue in force for a period stated on the certificate. The seller may refuse to honor a blanket certificate if the seller believes that the information contained in the certificate is no longer accurate or complete.

Sales and use tax liability for out-of-state mail order and catalogue retailers. Arizona has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within Arizona. To determine if you have physical presence, ask yourself the following:

Do I have retail facilities, a warehouse or any office space in Arizona? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
Do my employees or I enter Arizona for purposes of taking and transmitting orders from Arizona? If your employee or independent contractor goes into Arizona to take or transmit orders your business may have physical presence in Arizona. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
Do my delivery vehicles frequently enter Arizona for purposes of delivering property? Frequent deliveries in Arizona by your trucks will give you physical presence in Arizona.

Sales tax "bracket system." The state of Arizona has not issued a bracket system related to their transaction (sales) tax. The tax is on the sales of the seller, not on the purchaser in the state of Arizona.

Absorbing the tax — using a "no sales tax" advertising strategy to drum up business. The transaction privilege (sales) tax is the responsibility of the seller. If the seller imposes an added charge to cover the tax, or a charge identified as being to cover the tax, the seller cannot remit less than the amount collected to the state. Retailers are prohibited from advertising or stating to the public that the use tax will not be added to the selling price.

Claiming refund for excess tax payments. A claim for refund must be in writing and must specify the grounds for the claim. Claims must specify the amount of refund requested and the tax years involved in addition to the claimant's name, address, and tax identification number.