If you are a business owner selling products across state lines, it is essential to understand the sales tax requirements and economic nexus laws of each state. Arizona has an economic nexus law requires out-of-state businesses to collect and remit sales tax if they meet certain sales thresholds. In this article, we will provide an overview of Arizona’s economic nexus law, explain the nexus thresholds, and discuss what businesses need to do to comply with the law.
What is Arizona’s Economic Nexus Threshold?
Arizona’s economic nexus law mandates that out-of-state businesses collect and remit sales tax if they have more than $100,000 in sales in the current or previous calendar year. This law applies to businesses that sell taxable goods or services to customers in Arizona, regardless of whether they have a physical presence in the state.
Businesses need to monitor their sales in Arizona to determine if they have crossed the economic nexus threshold. Failure to comply with the law could result in back taxes, fines, or other penalties for non-compliance. To ensure compliance, businesses should consult with sales tax professionals like those at Galvix, who can help them understand Arizona’s economic nexus requirements.
When Did Arizona’s Economic Nexus Law Go Into Effect?
Arizona’s economic nexus law went into effect for out-of-state businesses on October 1, 2019. If your business crosses Arizona’s economic nexus threshold after this date, you must obtain a sales tax permit. If your business crossed the threshold before October 1, 2019, you would only need to register for a sales tax license in Arizona starting when the law went into effect.
It is important to note that businesses must also consider physical presence when determining their sales tax permit start date in Arizona. For example, if your business had a physical presence in Arizona before October 1, 2019, you may need to register for a sales tax permit earlier than when the economic nexus law went into effect.
What Are Businesses Supposed to Do if They Meet Arizona’s Economic Nexus Threshold?
Businesses that meet Arizona’s economic nexus threshold must register for a sales tax permit and begin collecting and remitting sales tax. To register for a sales tax permit, businesses must submit a completed Transaction Privilege Tax (TPT) License Application to the Arizona Department of Revenue.
After registration, businesses must keep records of taxable sales in the state and set up their transaction platforms to calculate sales tax accurately based on the products being sold. They must also file regular sales tax returns and remit the collected sales tax to the Arizona Department of Revenue.
Businesses need to stay up-to-date with any changes regarding filing guidelines that may arise in the future. For example, Arizona may change the sales tax rate or require additional reporting requirements.
By when does a business need to get a sales tax permit after crossing Arizona’s Economic Nexus Threshold?
Businesses that cross Arizona’s economic nexus threshold must register for a sales tax permit by the first day of the month 30 days from the establishment of the nexus. For example, if your business crosses the threshold on January 1, you must register for a sales tax permit by March 1.
What Could Happen if I Cross Arizona’s Economic Nexus Threshold and Don’t Get a Sales Tax Permit?
If your out-of-state business crosses Arizona’s economic nexus threshold and fails to obtain a sales tax permit, you could be subject to audits, penalties, and interest. The state may conduct an audit to review the prior period of time to determine if taxes are due. If taxes are owed, penalties will be applied based on the amount not paid. Interest will also accrue at the rate determined by the state for any unpaid taxes or late filing.
Getting Help with Arizona’s Economic Nexus Requirements
If your business crosses Arizona’s economic nexus thresholds, you must get a sales tax permit and collect and remit sales taxes on all taxable sales delivered into the state. Galvix can help you determine if your business meets Arizona’s economic nexus thresholds and, if so, obtain a sales tax permit for your business. We offer a free initial consultation to help businesses understand their sales tax obligations in Arizona. Click here to learn more and schedule your free consultation.