State Administration of Transaction Privilege Tax

Tax Simplification HB 2111

What is Tax Simplification or HB 2111?

• A law passed by the legislature and signed by the Governor in 2013. – Designates the Arizona Department of Revenue

(ADOR) as the single source for administration and collection of transaction privilege taxes

– All City, County and State transaction privilege tax returns will be collected by ADOR.

• Scheduled to become effective January 1, 2015.

Who is impacted?

• All businesses with a sales tax obligation to an Arizona city who previously collected their own taxes.

• 18 cities are currently “non-program” or self collecting cities: Scottsdale, Chandler, Phoenix, Tempe, Mesa, Glendale, Peoria, Tucson, Flagstaff, Sedona, Prescott, Apache Junction, Avondale, Bullhead City, Nogales, Wilcox, Somerton, and Douglas.

What will change? Licensing

• Licensing for Transaction Privilege Sales Tax (TPT) will now be done only through the State.

• The plan is for renewal notices for 2015 to come from the Arizona Department of Revenue.

• Businesses must indicate to the State the municipalities where they have a TPT obligation.

• Each city will have its own code. The code for Scottsdale is currently SD.

What will change? Filing

• Starting in February of next year, with the January 2015 tax return, all TPT returns for all cities in Arizona will be processed by the Department of Revenue.

• You will have the option of filing your tax return online with the State, you can pay directly through your checking account or by credit card with a fee.

• If your business has multiple locations you will be required to file online.

What will change? Filing

• TPT for Scottsdale will be reported on a separate line on the tax return . This will be the same for all other cities.

• Dollar limits for filing returns will also change: – If your yearly tax liability is between $500 and

$1250 you will be eligible for Quarterly filing, – If your full year tax liability is under $500, you will be

eligible for yearly filing.

What will change? Customer Service

• The Department of Revenue will have representatives available to help businesses with any questions they have.

• The City of Scottsdale will continue to have representatives available that can direct you to the people, department or information that you need.

• As the transition continues, there will be information on the City of Scottsdale website giving you the links you will need to the appropriate State forms.

What will change? Auditing

• The City of Scottsdale will be working in partnership with the Arizona Department of Revenue for TPT auditing.

• Any audit correspondence you receive after January 2015 will be on ADOR letterhead.

• All auditors will be trained in a uniform method of conducting audits.

Will tax liability be impacted?

• There are no major changes to tax liability for most businesses. Cities will continue to operate under the Model City Tax Code that has been in place for over 25 years.

• The State of Arizona will tax under the appropriate Arizona Revised Statutes.

• Tax rates will not change for Scottsdale. The city rate continues to be 1.65%.

What about contracting?

• Anyone in the Prime Contracting business category (builders-doing modification) will continue to report tax liability under the same rules.

• Contractors who solely perform contracts for maintenance, repair, replacement and alteration do not have to register as a Prime Contractor. Their taxes for materials will be paid at the point of sale.

What about residential rentals?

• Residential rentals in Scottsdale will continue to be taxed once an owner has 3 or more rental units in the State.

• What has changed is that each rental location must have a separate license but the fee will still be $2 per location.

What about Special Event Vendors?

• Special Event vendors who have a tax obligation will follow the same process as other businesses. They will need to have a State license with a Scottsdale location on their application.

• There will no longer be a temporary license option. • Vendors will be able to indicate the months they

will be participating in events and only receive tax returns for those months.

Will my license fees change?

• The overall license fees that businesses will have to pay will not change.

• Penalty fees will remain the same. • Each city will have their fees listed in a schedule

on the ADOR website and on the Arizona Joint Tax Application.

What is happening now?

• Right now it is business as usual. • The City of Scottsdale is still taking applications

and processing returns. • Tax and License is open to help with licensing,

cashiers are available to take payments and passport processing continues.

Are there any other questions?

• Thank you for your time! For updated information please check the Arizona Department of Revenue website: www.azdor.gov