use tax workshop november 30, 2009. use tax workshop city of surprise use tax becomes effective...

USE TAX WORKSHOP

November 30, 2009

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City of Surprise Use Tax Becomes Effective January

01, 2010

• Use tax is a tax on Tangible Personal Property (TPP) purchased or leased for storage or use in the city, on which tax was not paid at the time of purchase or rental.

• This protects local vendors because it removes the incentive to shop outside of the city or state to avoid paying the city sales tax.

What is Use Tax?

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• Transaction privilege (sales) tax is paid by the seller or lessor, but use tax is usually paid by the buyer or lessee.

How is Use Tax Different From Transaction Privilege (Sales) Tax?

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• Individuals who purchase single items over $1,000 each.

• All businesses are required to pay use tax on their untaxed purchases or rentals of tangible personal property.

Who Pays the Use Tax?

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• The City of Surprise use tax rate is 2.2%; the combined rate, including State tax, is 7.8%.

What is the City Use Tax Rate?

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•The provider of TPP under a warranty, maintenance or service contract must pay use tax;•A retailer must report use tax based on the cost of products purchased for resale but used by the retailer instead;•Use tax must be paid by a restaurant on the cost of food provided to employees.

What is Subject to Use Tax?

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These apply if the person has not already paid an equivalent city sales tax of at least 2.2% on the item purchased:

• Use tax must be paid on the cost of items purchased for free distribution to customers.

• Use tax must be paid on the cost of building supplies and tools that were not incorporated into a building project.

• The cost of complimentary items provided to customers of a restaurant, hotel, or other business.

What is Subject to Use Tax?(continued)

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• Use tax is reported in the month of purchase using the Arizona Department of Revenue Transaction Privilege, Use, and Severance Tax Return (TPT-1).

• Report only the taxable purchases; no deductions are allowed.

• The TPT-1 return and payment are due on the 20th day of the month following the reporting period.

How is Use Tax Reported?

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• Office equipment was purchased from a vendor in New York and shipped to you in Arizona.

• No tax was charged at the point of sale.• The equipment cost $2,000.00.• $2,000.00 X .056 = $112.00 State use tax due.• $2,000.00 X .022 = $ 44.00 City use tax due.

Total State and City use tax due = $156.00

Example Number 1

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Reporting Purchases Where No Sales Tax Was Paid

Reporting Use Tax

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• A retailer purchases products for resale and does not pay sales tax.

• The retailer uses the products for the business and the purchase price was $1,000.00.

• $1,000.00 X .056 = $56.00 State use tax due.• $1,000.00 X .022 = $22.00 City use tax due.

Total State and City use tax due = $78.00

Example Number 2

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Reporting Use Tax for Items Purchased at Resale and Then Used

Reporting Use Tax

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• Copies of invoices that show the cost of purchases and the amount of sales tax paid.

• Records of all purchases and rentals of TPP should be retained for at least four years.

What Records Should be Kept?

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Pamela Pieri, Tax Auditor623-222-1840

Martha Salgado, Tax Auditor623-222-1841

For Any Questions, Contact:

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