Arizona Sales Tax Nexus Requirements 2026 (TPT)

What is Arizona TPT?

Transaction Privilege Tax (TPT) is Arizona's version of sales tax, but with important differences. Understanding these differences is crucial for compliance:

TPT vs. Sales Tax

• Tax on the Seller: TPT is technically a tax on the seller for the privilege of conducting business in Arizona, not a tax on the buyer. The seller may pass this cost to buyers, but the legal liability is on the seller.
• Origin-Based: For sellers with physical presence in Arizona, tax rates are based on the seller's location, not the buyer's. This is unique compared to most states that use destination-based sourcing.
• Multiple Tax Bases: Arizona, counties, and cities each set their own rates and can have different taxable items. The state tax is uniform, but local taxes vary significantly.

Remote Seller Rules

For remote sellers without physical presence in Arizona, the state adopted destination-based sourcing. This means you calculate tax based on the customer's delivery address, similar to most other states. The combined state and local rate for the customer's location applies.

Arizona Economic Nexus Rules

Arizona established economic nexus effective October 1, 2019. The state has since simplified its threshold to focus solely on revenue.

Arizona's Economic Nexus Threshold

• Revenue Threshold: $100,000 in gross proceeds or gross income from retail sales into Arizona during the previous or current calendar year
• Transaction Threshold: None (removed in 2021)
• Measurement Period: Previous or current calendar year

Calculating Your Threshold

When determining if you meet Arizona's threshold:

• Include gross proceeds from all retail sales delivered into Arizona
• Include both taxable and exempt sales in your calculation
• Exclude sales made through marketplace facilitators who collect on your behalf
• Use the previous or current calendar year (if you exceed in either, you have nexus)

When to Start Collecting

Once you exceed the $100,000 threshold, you must register for a TPT license and begin collecting tax. Arizona expects registration within 30 days of establishing nexus, with collection beginning as soon as practicable after registration.

Understanding Origin-Based Tax

Arizona's origin-based system is unique and can be confusing. Here's how it works:

For Remote Sellers (No Physical Presence)

If you have no physical presence in Arizona and only have economic nexus, you use destination-based sourcing:

• Calculate tax based on the customer's delivery address
• Use the combined state + county + city rate for that location
• This is similar to how most other states work

For In-State Sellers (Physical Presence)

If you have physical presence in Arizona, you use origin-based sourcing:

• Tax rate is based on your business location, not the customer's
• Simplifies compliance for businesses with one location
• Can be complex for businesses with multiple Arizona locations

Local Tax Complexity

Arizona's local tax rates vary dramatically by city. Phoenix has a combined rate of 8.6%, while some smaller cities have rates exceeding 10%. Always verify rates using the Arizona Department of Revenue's rate tables or TPT rate lookup tool.

Physical Presence Nexus in Arizona

Physical presence creates TPT nexus regardless of sales volume:

• Having an office, warehouse, or store in Arizona
• Employing workers in Arizona (including remote employees)
• Storing inventory in Arizona (including Amazon FBA)
• Owning or leasing property in Arizona
• Having sales representatives soliciting orders in Arizona
• Providing services or installation in Arizona
• Attending trade shows in Arizona for more than two days

Amazon FBA in Arizona

Amazon operates fulfillment centers in Phoenix, Goodyear, Tolleson, and other Arizona locations. If you use FBA and Amazon stores your inventory in Arizona, you have physical presence nexus and are subject to origin-based sourcing rules.

Do I Have Nexus in Arizona?

How to Register for Arizona TPT

1. Create an account on AZTaxes.gov
2. Complete the Joint Tax Application (JT-1)
3. Select the appropriate business classifications
4. Provide your federal EIN and business information
5. Submit the application (no fee required)
6. Receive your TPT license number

For a detailed walkthrough, see: How to Register for Arizona TPT

Filing Requirements

Arizona assigns TPT filing frequency based on annual tax liability:

• Monthly: Annual liability over $2,000
• Quarterly: Annual liability $500-$2,000
• Annual: Annual liability under $500
• Seasonal: Liability under $2,000 with predictable seasonal pattern

Returns are due by the 20th of the month following the reporting period. Arizona offers electronic filing through AZTaxes.gov and requires electronic payment for most filers.

See: Arizona TPT Filing Deadlines

Penalties for Non-Compliance

• Late Filing Penalty: 4.5% of tax due per month, up to 25%
• Late Payment Penalty: 0.5% of tax due per month, up to 10%
• Interest: Set by the Arizona Department of Revenue
• Failure to Register: $100-$500 per month, plus back taxes

See: Arizona TPT Penalties