Business owners coming from other states are often surprised to learn that Arizona does not have a traditional sales tax. Instead, it has a transaction privilege tax, or TPT, which is a tax on the business for the privilege of doing business in the state. In practice, many businesses pass it on to customers, but the legal responsibility is the seller’s. This guide explains who needs a TPT license and how licensing works. It is general information, not tax advice.
Key takeaways
- TPT is a tax on the seller, not a sales tax on the buyer, though it is often passed on to customers.
- According to the Arizona Department of Revenue, the state license fee is $12 per location, plus any city fees.
- State and city TPT licenses are handled through the Department of Revenue, including for the City of Phoenix.
What TPT is
Transaction privilege tax applies to business activities in categories such as retail sales, restaurants and bars, commercial leasing, contracting, hotels and others. The tax rate combines state, county and city portions, and it varies by business type and city. Each city in the Valley sets its own rates and some tax activities the state does not.
Who needs a license
Generally, if your business engages in a taxable activity in Arizona, you need a TPT license before you start. Retail stores, restaurants, contractors and landlords of commercial property are common examples. Out-of-state sellers above certain thresholds may also need a license. Some businesses only sell services that are not taxable and may not need one. Check the Department of Revenue’s guidance for your business type.
Fees
According to the Department of Revenue, the state fee for a TPT license is $12 per location. Many cities charge their own license fee on top of that. The City of Phoenix says its license fee is $50, due within 30 days of the business start date in the first year, with a $50 renewal due each January 1. Fees change, so confirm current amounts when you apply.
State fee vs city fee
| State | City of Phoenix | |
|---|---|---|
| License fee | $12 per location | $50 |
| Renewal | Annual | $50, due January 1 |
| Where to apply | Department of Revenue | Through the Department of Revenue |
How to apply
You can apply online through the state’s tax portal or use the Arizona Joint Tax Application. The joint application also lets you register for employer withholding and unemployment insurance at the same time, which is useful if you will hire staff. You list each business location and the cities where you do business, so the correct city licenses are included.
Tip: List every location and every city where you will make taxable sales when you apply. A missing city is a common reason for extra paperwork later.
Filing and paying
Once licensed, you file TPT returns on a schedule assigned by the Department of Revenue, often monthly, quarterly or annually depending on your tax liability. Returns report your sales by business type and location. Keep good records of sales, deductions and exempt sales, and keep documentation for any exemptions you claim.
Use tax
Arizona also has a use tax, which can apply when a business buys taxable goods from a seller that does not charge Arizona tax and uses them in Arizona. Businesses moving equipment or buying supplies from out of state should read the Department of Revenue’s use tax guidance.
Renewals
- TPT licenses renew each year; watch for notices.
- Renew for each location and each city.
- Update your license if you add or close a location.
- Cancel the license if you stop doing business, so filing obligations end.
Common mistakes
The most common mistake is assuming Arizona works like a sales tax state and waiting to register. Another is applying for the state license but forgetting to add every city where you do business. Businesses also sometimes forget to cancel a license after closing a location, and then receive notices for missing returns. Keep your license list current.
Frequently asked questions
Is TPT the same as sales tax?
No. TPT is a tax on the seller for doing business in Arizona, though it is often passed on to customers and looks similar at checkout.
How much is a TPT license?
According to the Department of Revenue, $12 per location for the state, plus any city fees. Phoenix charges $50.
Where do I get a Phoenix TPT license?
Through the Arizona Department of Revenue, which handles state and city licensing together.
If you will have staff, read Hiring Your First Employees in Arizona. For the full move, see Moving a Business to Phoenix: A Step-by-Step Checklist.