Current through Register Vol. 30, No. 38, September 20, 2024
A. The transaction privilege tax is imposed
directly on the person engaged in a taxable business in or within Arizona,
including a retailer located outside the state who is engaging or continuing in
business in this state as a remote seller or marketplace facilitator and who
meets the threshold requirements in A.R.S. § 42-5044. The vendor shall be
liable for the tax, regardless of whether or not the vendor passes on the
economic burden of the tax to the customer.
B. A retailer establishes its physical
presence within Arizona by activities performed in this state on its behalf
that are significantly associated with the retailer's ability to establish and
maintain a market in this state for its sales. Activities and factors that, by
themselves or in conjunction with others, establish a retailer's physical
presence within Arizona include the following:
1. The retailer maintains an office or other
place of business in Arizona, regardless of whether such location performs a
sales-related or other business function.
2. The retailer owns or leases real or
personal property in Arizona.
3.
The retailer maintains an inventory of products in Arizona at its own direction
and control.
4. The retailer's
merchandise or goods are delivered into Arizona on vehicles owned or leased by
the retailer and the retailer makes such deliveries into Arizona on an ongoing
basis.
5. Other local activities
performed by the retailer's employees, agents, representatives, contractors, or
affiliated persons in Arizona that enable the retailer to maintain and improve
its name recognition, market share or sales volume, goodwill, and individual
customer relations may establish physical presence if the activities are not of
a transitory nature, as described in subsections (D) and (E). Such activities
may include: soliciting sales through an ongoing local marketing contract;
delivering, installing or repairing property sold to customers through an
ongoing contract with either the customer or a local partner; or conducting
training or similar support services for customers or for employees or
representatives of the retailer on an ongoing basis.
C. A retailer having a physical presence
within Arizona as described in subsection (B) of this Section shall be
considered liable for transaction privilege tax as a taxpayer located within
Arizona.
D. A retailer's activities
in Arizona are not of a transitory nature if such activities generate gross
receipts, are ongoing, and are regularly conducted from within the state.
Alternately, a retailer's activities in Arizona are not of a transitory nature
if such activities generate gross receipts and the retailer regularly conducts
the same business activities outside of Arizona.
1. Example: Employees who travel to Arizona
for a business meeting, conference, or similar event and who do not otherwise
engage in a taxable business activity during their time within the state would
not establish physical presence in Arizona, regardless of the duration of their
stay. Such stays would not be considered ongoing, even though the events take
place in Arizona.
2. Example: A
retailer that provides remote one-time assistance to a customer who has a
specific problem installing or using a product purchased remotely would not
establish physical presence. The retailer's assistance does not appear ongoing
and the activity is conducted from outside the state.
3. Example: A retailer that sells
WiFi-enabled (IoT) appliances also offers a service contract that allows its
technicians to remotely access its customers' appliances to regularly update,
maintain, or troubleshoot firmware. The provision of services through such
contracts with Arizona customers would not establish physical presence for the
retailer. The retailer's services, while ongoing, are conducted from outside
the state.
4. Example: A retailer
that has a salesperson who regularly travels to Arizona for the purposes of
selling goods and services and supporting previously sold goods and services
may have physical presence, even if the salesperson is a resident of California
and only present in Arizona temporarily throughout the calendar year. The
retailer's sales activities, as conducted through its salesperson, are ongoing
and conducted from within the state.
5. Example: A retailer's employee who is a
Nevada resident but is working remotely from Arizona while on vacation,
performing bookkeeping and other routine business functions, does not establish
physical presence in Arizona for the business. The employee's in-state
activities are not significantly associated with a retailer's ability to
establish and maintain a market in Arizona for its sales.
6. Example: A new Utah-based retailer that
has never made any sales to Arizona purchasers brings an inventory of crystals
to sell at a two-day mineral and fossil show in Arizona. Over the two-day
period, the retailer makes $3,000 in sales. As an out-of-state retailer making
sales from within Arizona who has not met the threshold requirements in A.R.S.
§ 42-5044, the retailer will incur an Arizona transaction privilege tax
liability on the sales it makes at the show. Such Arizona-based sales are not
considered for purposes of meeting the threshold requirements for a remote
seller, pursuant to A.R.S. § 42-5044. If the retailer does not anticipate
conducting additional sales from within Arizona on an ongoing basis, it should
apply for a seasonal license to participate in the show.
7. Example: At the same mineral and fossil
show described in subsection (D)(6), an new Arizona-based retailer of
semi-precious gems also brings an inventory to sell at the show for the first
time. As a retail business located in Arizona, the retailer must be licensed
and must report and remit Arizona transaction privilege tax on its sales made
at the show.
E. Effective
October 1, 2019, a retailer that establishes physical presence in Arizona
pursuant to this rule shall continue to be responsible for reporting and
remitting transaction privilege tax for the duration of such physical presence.
If the retailer terminates its physical presence in the state, it shall report
and remit transaction privilege tax for all transactions occurring on or before
the last day of the month in which the vendor terminates its physical
presence.
