Under new Arizona law that takes effect October 1, 2019, out-of-state online retailers doing business in Arizona may be required to collect and remit transaction privilege sales tax (TPT) to the state of Arizona. Remote sellers must file and pay if their total annual sales exceed:
- $200,000 in 2019,
- $150,000 in 2020, and
- $100,000 in 2021 and thereafter.
This legislation is the result of a 2018 ruling by the U.S. Supreme Court in the South Dakota v. Wayfair case. The decision allows states to require out-of-state online businesses without a physical presence to collect and remit sales tax from transactions in their state.
In addition to remote sellers, the new Arizona law covers marketplace facilitators. Starting October 1, marketplace facilitators may be required to collect and remit TPT on taxable sales in Arizona made through their platforms on their behalf or for at least one remote marketplace seller. The threshold for marketplace facilitators will be gross retail proceeds or income that exceeds $100,000 annually.
Remote sellers will not be required to collect TPT on transactions where a marketplace facilitator is collecting and remitting TPT for them.
In preparation for the October 1 implementation, the AZ Department of Revenue is modifying its TPT systems and will be providing guidance to remote sellers and marketplace facilitators on when they should begin the TPT licensing process. As part of the new legislation, municipal licensing fees will be waived for both remote sellers and online marketplace facilitators.
REDWâ€™s State and Local Tax specialists closely monitor developments resulting from the Wayfair decision. Please contact James Ortiz, Senior Tax Manager, 505.998.3468, if you wish to discuss your state and local tax needs.