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1 Arizona Sales Tax & Use Tax Tax Compliance Financial Services Office.

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Presentation on theme: "1 Arizona Sales Tax & Use Tax Tax Compliance Financial Services Office."— Presentation transcript:

1 1 Arizona Sales Tax & Use Tax Tax Compliance Financial Services Office

2 2 Sales Tax Defined Transaction Privilege Tax: tax imposed on vendors for the privilege of doing business in AZ Vendors register as a merchant in AZ and have a AZ business license AZ vendors usually pass the tax on to the customers, but the vendors are ultimately liable for the tax (file sales tax return and remit the tax to the State)

3 3 Sales Tax Rate AZ State Tax: 5.6% for most of the categories including retail, restaurant, utilities, communications, job printing publication, and lease of personal property.

4 4 Sales Tax Rate Pima County excise tax: 0.5% for most of the classifications such as retail, restaurant, utilities, communications, job printing, publication.

5 5 Sales Tax Rate Tucson city sales tax The University of Arizona DOES NOT charge city sales tax to its customers but pays to Tucson vendors if charged Tax rate is 2% for most of the classifications, such as retail, restaurant, job printing, publication, lease of personal property, and amusement 4% for utilities and telecommunication

6 6 Sales Tax Rate: Summary For most of the categories: State : 5.6% Pima County: 0.5% State & County Combined: 6.1% Tucson City*: 2% Applies when the University is a purchaser and purchase from a Tucson Vendor

7 7 Sales Tax Rate: Transient Lodging Transient Lodging Classification (Hotel Tax*) State: 5.5% Pima County 0.55% Tucson City: 6% Total in Tucson: 12.05% * varies if the hotel is located in different state, county and city

8 8 Use Tax Defined Tax on the use, storage or consumption of tangible personal property in AZ AZ Purchasers are liable for the use tax on goods purchased from an out-of-state vendor which did not collect the use tax (out-of-state vendor may collect use tax) If the sales tax has been paid on the purchase, then exempt from use tax

9 9 Use Tax Rate AZ State use tax rate is generally 5.6% Counties generally do not impose use tax The university is not subject to city use tax

10 10 Tax at University of Arizona As a Purchaser The University is NOT an exempt entity for AZ sales and use tax purpose The University of Arizona generally pays sales tax to the vendor or self-assesses use tax on its purchases if the vendor does not charge sales tax/use tax Specific exemptions may apply if in the AZ State Statutes – on a purchase-by-purchase basis If there is a sales tax exemption, then a corresponding use tax exemption generally also exists

11 11 Nontaxable/Tax-exempt Services Professional and personal services Repair, maintenance and installation services (if charges are separately stated on invoices and records) Warranty or service contract (if not required to purchase with the tangible personal property, and is charged separately on an invoice) Delivery charges (freight or shipping) if separately stated on the invoice Internet access and cable services Conference registration fees Professional membership dues

12 12 General Exemptions on Tangible Personal Property Machinery and equipment used in research and development Chemicals used in research and development Printed and other media materials (available to the public) by UA Libraries Food for home (human) consumption Medically prescribed drugs, equipment or devices Purchase for retail Others as set forth in statutes such as ARS or ARS

13 13 Tax Exemption on Research Equipment Research does not include (1) social science (2) psychology (3) computer software development (4) non-technological activities or technical services Equipment does not include (1) expendable materials (2) office equipment, furniture and supplies (3) hand tools (4) janitorial equipment (5) licensed motor vehicles (6)shops, buildings, depots

14 14 Equipment should be used exclusively for research Dollar amount does not necessarily affect the decision A repair or replacement part of a tax- exempt research equipment is exempt Leases and rentals of tax-exempt research equipment are exempt Tax Exemption on Research Equipment (Contd )

15 15 Exemption on Chemicals Used in Research Research does not include (1) social science (2) psychology (3) computer software development (4) non-technological activities or technical services Chemicals cannot be used or consumed in activities such as packaging, storage or transportation It is up to the researcher who orders the item to determine whether it is chemical

16 Supplies and Materials Used in Research – Generally NOT exempt If an item does not fit into equipment used in research or chemical used in research, it generally DOES NOT qualify for tax exemption. 16

17 17 Computer Hardware, Software & Services Hardware: generally taxable Custom software is not taxable Pre-written software is taxable, regardless if it is CD-Rom or through digital means Computer services such as analysis, design, repair, support engineering are not taxable Maintenance and warranty agreement for hardware and software: is generally not taxable if it is sold as a separate item and the price is stated separately Software maintenance agreement for canned updates, modification or revisions is taxable

18 18 Internet Purchase Internet purchases are generally subject to Sales Tax or Use Tax Some companies charge sales tax on their online sales Other companies do not charge sales tax leaving the liability of use tax on the purchaser

19 19 Apply for Tax Exemption with the Vendor Vendors usually charge sales tax on tangible personal property in absence of a Sales Tax Exemption Certificate The Tax Exemption Certificate should provide the Universitys Federal Tax ID ( ), AZ Sales Tax License Number ( ), and the reason for exemption The Tax Exemption Certificate for a P-card purchase must be signed by the individual at the Department who authorizes the purchase Tax exemption certificate is located on eForms:

20 20 Tax Exemption Certificate

21 21 Tax Exemption Certificate

22 22 Apply Exemption on Use Tax When an out-of-state vendor is registered to collect use tax, provide the Sales Tax Exemption Certificate to claim exemption on use tax with the vendor. If the vendor does not charge any sales or use tax, document the reason for the use tax exemption and keep in file (can use Sales Tax Exemption Certificate or memo) Reconcilers must check the service/tax exempt box in PaymentNet to avoid paying Use Tax

23 Tax at University of Arizona As a Seller Departments responsibility (1) identify the taxable sales, collecting the sales and tax revenues and depositing the revenues to the University accounts; (2) maintain detailed records of sales activities. FSOs responsibility: prepare Sales Tax return and remit the tax receipts to the State of Arizona

24 Common Tax Exemptions on Sales Professional or Personal Services Sales to vendors for resale Freight or shipping if separately stated on the invoice Sales to a non-resident for use outside Arizona when the retail item is shipped or delivered the outside Arizona. Textbooks required for course work sold by bookstore Sales or renting to nonprofit or state-operated hospitals and healthcare facilities (must have an Exemption Letter issued by AZ department of revenue) A certain food sales, including vending machine food, student meal tickets and patient food Others as set forth in ARS or ARS

25 Special Case: Retail Sales to Out-of-State Customers If an order is called in by an out-of-state purchase and delivered directly to the out-of- state address, the sales are tax-exempt: must maintain the proper shipping documentation If the out-of-state customer picks up the merchandise in AZ, sales are taxable unless the purchaser has proof of out-of-state residence and the merchandise is shipped out of State for use out of State. The department must maintain appropriate exemption certificate provided by the purchaser.

26 Publications If the item (e.g. newspapers, magazines, journals) is published in AZ, the publisher is liable for sales tax even the customer subscribe from out-of-state Books are under retail category so sales tax is exempt on out-of-state sales 26

27 Special Case: Sales to Federal Government Retail sales are taxable at one-half of the regular tax rate (3.05%). Exempt on products sold directly to the US government as a manufacturer, modifier, assembler or repairer of such products

28 Resources: Arizona Sales and Use Tax 28

29 29 Contact Information For assistance to determine the taxability of a purchase/sales: FSO-Tax Compliance: For assistance to record the purchase, sales and related tax; correction of use tax: FSO-Financial Management:

30 30 Questions?

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