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Arizona Sales Tax & Use

Tax

Chunyan PanTax Manager

Financial Services Office

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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)

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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.

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Sales Tax Rate

Pima County excise tax: 0.5% for most of the

classifications such as retail, restaurant, utilities, communications, job printing, publication.

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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 (new effective 7/1/09)

4% for utilities and telecommunication (increased from 2% effective 7/1/09)

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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

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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

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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 that did not collect the use tax

If the Sales tax has been paid on the purchase, then exempt from Use Tax

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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

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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

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

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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

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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 status such as ARS 42-

5061 or ARS 42-5159

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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

http://www.fso.arizona.edu/fso/deptman/10/1014spec.html

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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(Cont’d )

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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”

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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 is sold as a separate item and the price is stated separately

Software maintenance agreement for canned updates, modification or revisions is taxable

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Internet Purchase

Internet purchases are generally subject to Sales Tax or Use Tax

Some internet companies record the Arizona State Sales tax rate and will charge Sales Tax accordingly

Some internet companies do not charge sales tax leaving the liability of Use Tax on the purchaser

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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 University’s Federal Tax ID (74-2652689), AZ Sales Tax License Number (20221243), 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: http://uabis.arizona.edu/eforms/Launcher.asp?FormID=172

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Tax Exemptio

n Certificat

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Tax Exemptio

n Certificat

e

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Apply Exemption on Use Tax

If the vendor does not charge Sales tax, and does not request the Sales Tax Exemption Certificate, document the reason for Use Tax exemption

Reconcilers must check the ‘service/tax exempt’ box in PaymentNet to avoid paying Use Tax

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Contact Information For assistance to determine the

taxability of a purchase: Chunyan Pan, Tax Compliance 621-

1957

For assistance to record the purchase, sales and related tax; correction of use tax:

Fred Pearson, Financial Management 621-6748

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Questions?