Arizona Sales Tax
Section 1 -- Quick reference
Quick reference
| Field | Value |
|---|---|
| Jurisdiction | Arizona, United States |
| Jurisdiction code | US-AZ |
| Tax type | Transaction Privilege Tax (TPT) -- NOT a traditional sales tax; tax is on the SELLER |
| State TPT rate | 5.6% (retail classification) |
| Local add-on range | 0% -- 5.6% (city + county) |
| Maximum combined rate | ~11.2% |
| Sourcing | Origin-based for most TPT classifications |
| Economic nexus | $100,000 in gross proceeds or gross income (revenue only) |
| Primary legislation | A.R.S. Title 42, Chapter 5 |
| Tax authority | Arizona Department of Revenue (ADOR) |
| Filing portal | https://www.aztaxes.gov |
| SST member | No |
| Federal framework skill | us-sales-tax |
| Skill version | 2.0 |
CRITICAL: Arizona TPT is a tax on the privilege of doing business in Arizona, imposed on the SELLER. It is NOT a sales tax on the buyer, though sellers typically pass it through.
Required inputs
Required inputs
| # | Question | Why it matters |
|---|---|---|
| 1 | Arizona TPT license number? | Required for filing |
| 2 | Filing frequency? | Monthly, quarterly, annual |
| 3 | Nexus type? | $100K threshold |
| 4 | Business classification? | Different TPT rates by classification |
| 5 | Contractor? | Prime contracting has special 65/35 split rules |
| 6 | Sell into multiple cities? | City TPT rates vary significantly |
Refusal catalogue
- R-AZ-1 — Prime contracting classification. 65/35 split between real property and materials is complex. Escalate. (R-AZ-1 -- Prime contracting classification)
3.1 Retail classification (5.6% state)
Retail classification patterns
| Pattern | Taxable? | Notes |
|---|---|---|
| General TPP | TAXABLE | Retail classification |
| Clothing | TAXABLE | No exemption |
| Grocery food (unprepared) | EXEMPT | A.R.S. §42-5061(A)(1) |
| Prepared food | TAXABLE |
3.2 SaaS and digital goods
SaaS and digital goods patterns
| Pattern | Taxable? | Notes |
|---|---|---|
| Canned software (physical or download) | TAXABLE | TPP |
| SaaS (cloud-hosted) | TAXABLE | Arizona treats SaaS as taxable |
| Digital goods | TAXABLE |
3.3 Services
Services patterns
| Pattern | Taxable? | Notes |
|---|---|---|
| Professional services | NOT TAXABLE | |
| Job printing | TAXABLE | Separate classification |
| Restaurants/bars | TAXABLE | Restaurant classification |
| Transient lodging | TAXABLE | Transient lodging classification |
| Personal property rental | TAXABLE | Rental classification |
| Prime contracting | TAXABLE | 65/35 rule applies |
3.4 Exemptions
Exemptions
| Pattern | Status |
|---|---|
| Grocery food | EXEMPT |
| Prescription drugs | EXEMPT |
| Manufacturing machinery (directly in manufacturing) | EXEMPT |
| Resale | EXEMPT |
| Interstate commerce | EXEMPT |
4.1 TPT classifications and state rates
TPT classifications and state rates
| Classification | State rate |
|---|---|
| Retail | 5.6% |
| Mining | 3.125% |
| Utilities | 5.6% |
| Telecommunications | 5.6% |
| Transient lodging | 5.5% |
| Restaurants/bars | 5.6% |
| Contracting (prime) | 5.6% |
| Rental of TPP | 5.6% |
5.1 TPT is on the seller
- TPT liability — TPT is a privilege tax on the seller for conducting business. The buyer is NOT legally liable. Most sellers pass the amount through to buyers.
5.2 Model City Tax Code
- Model City Tax Code — Arizona cities adopt the Model City Tax Code with local modifications. City rates and exemptions can vary significantly.
Section 6 -- Return form and filing
Filed via AZTaxes.gov. Single return covers state + county + city TPT.
7.1 Economic nexus
Economic nexus
| Parameter | Value |
|---|---|
| Threshold | $100,000 in gross proceeds or gross income |
| Transaction count | None |
| Effective date | October 1, 2019 |
EC1 -- Prime contracting
Situation: Contractor builds a house. Resolution: Prime contracting classification. 65% of contract price treated as real property improvement (not taxable); 35% treated as materials (taxable at TPT rate). Complex -- escalate.
Test 1 -- Retail sale in Phoenix
Input: $500 item. Combined rate: ~8.6%. Expected: Tax = ~$43.
Test 2 -- Grocery food exempt
Input: $200 groceries. Expected: Tax = $0. Grocery food exempt in AZ.
Section 10 -- Prohibitions
- NEVER call Arizona's tax a "sales tax" without noting it is a Transaction Privilege Tax on the SELLER.
- NEVER forget that city TPT rates and exemptions can differ from the state.
- NEVER apply destination-based sourcing for most TPT classifications -- Arizona is generally origin-based.
- NEVER treat grocery food as taxable -- it is exempt in Arizona.
- NEVER compute any number -- all arithmetic is handled by the deterministic engine, not Claude.
Disclaimer
This skill is provided for informational and computational purposes only and does not constitute tax, legal, or financial advice. All outputs must be reviewed by a qualified professional before filing.
Disclaimer
This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional (such as a CPA, EA, tax attorney, or equivalent licensed practitioner in your jurisdiction) before filing or acting upon.
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General reference only. This document does not constitute tax, legal, or financial advice. Verify figures against the cited primary sources or with a licensed professional before relying on them.
Today's figures and who stands behind this skill
This file is an AI skill (tax rules your AI follows) from OpenAccountants, copied on 2026-07-13. Rates, thresholds and deadlines change. For the current version of this skill, its official sources and the named accountant (if any) who stands behind it, call get_skill with slug arizona-sales-tax on the OpenAccountants connector (https://www.openaccountants.com/connect), or read https://www.openaccountants.com/skills/arizona-sales-tax. If neither is available, confirm every figure against the official source pages cited above before relying on it.
