TAX NEWS - August 2009

Arizona Taxes

Taxes

One of the responsibilities of starting or operating a business is determining the type of taxes your business should pay.


Federal Income Tax

Every business must file an annual return with the Internal Revenue Service (IRS). Separate forms or schedules apply, depending on the type of business. The IRS has excellent, easyto-read publications to help you understand the tax system.

Questions about federal tax rules should be directed to the Internal Revenue Services (IRS) at 800-829-1040.


Federal Employment Taxes

For more information, review the "Hiring Employees and Contract Labor" section of this resource guide.


Federal Excise Taxes

These taxes are collected from manufacturers and sellers of certain products. Several common taxes include: environmental taxes on crude, petroleum products and certain chemicals; taxes on telephone communications and air transportation; fuel taxes on gasoline, diesel and gasohol; and taxes on certain luxury items, alcohol, tobacco and guns. The IRS will provide a complete list on excise taxes and specific information and literature.


Arizona Transaction Privilege Tax License (Sometimes referred to as: TPT, Sales, Wholesale or Resale License)


Selling Products

If you sell tangible products, you must be licensed with the Arizona Department of Revenue (DOR) and are responsible for the transaction privilege tax under the retail classification.


Services

Arizona does tax certain "service" businesses such as amusements, contracting activities, real property rentals, street and sidewalk vendors, some transportation activities, etc.

To review tax publications regarding activities subject to the transaction privilege tax, visit the Arizona Department of Revenue website at http://www.aztaxes.gov, and click on "View/Print brochures."


Arizona Joint Tax Application

The Arizona Joint Tax Application is used to apply for:
- Transaction Privilege Tax (TPT)
- Withholding/Unemployment Tax
- Use Tax
- TPT for Cities

The application is called "Joint" because it is used by both the Arizona Department of Revenue and Arizona Department of Economic Security.

DOR also issues City Transaction Privilege Tax licenses for cities that have entered into a joint collection program with the state. The fees vary from city to city, and a listing of participating municipalities is provided on the application.

Apply online at http://www.aztaxes.gov or download the form from DOR's website at http://www.azdor.gov and mail in or take in person to one of DOR's locations. Fee is $12.00 plus applicable city fee(s).


Use Tax License

Who needs to pay Use Tax:

- Any person that uses, stores or consumes any tangible, personal property upon which Arizona Transaction Privilege Tax has not been collected by a retailer must pay use tax.

- An out-of-state retailer or utility business making sales of tangible personal property to Arizona purchaser must register with the Arizona Department of Revenue for the collection of the use tax.

- An Arizona purchaser is liable for use tax on goods purchased from an out-of-state vendor that did not collect the use tax.

- Arizona purchasers are liable for use tax if they purchase goods using a resale certificate, and the goods are subsequently used, stored or consumed in Arizona contrary to the purpose stated on the certificate.

- The use tax also applies to purchases on which another state's sales tax or other excise tax was imposed if the rate of that tax is less than the Arizona use tax rate.

If you currently have a Transaction Privilege Tax License, you do not need a separate state license for use tax. You can report any use tax due using your Transaction Privilege or Use Tax License number. Businesses are required to remit use tax payments as transactions occur.

In addition, check with your city/town directly regarding possible city use tax liability.

Wholesale Tobacco Dealer's License and Liquor Wholesalers, Microbreweries, Farm Wineries and Cider Products Contact the Arizona Department of Revenue, Luxury Tax Section at 602-716-7808 to obtain the necessary tax forms to report and pay taxes.


Withholding and Unemployment Tax

For more information on Withholding and Unemployment Tax, review the "Hiring Employees and Contract Labor" section of this resource guide.



Corporate Income Tax

Every corporation doing business in Arizona is required to file a corporate income tax return.

Corporations may make an irrevocable election to file a consolidated return with Arizona for the same affiliated group that files a federal consolidated return.

If the corporation does not elect to file a consolidated return, it may file as part of a unitary group if operationally integrated with other corporations with a common ownership of 50 percent or more, or it may file as a separate corporation depending on the facts and circumstances.

Corporate income tax returns and final payments are due on the 15th day of April following the close of the calendar year. If the company's return is filed on the basis of its fiscal year, the return will be due on the 15th day of the fourth month following the close of the fiscal year.

Corporations that expect to owe $1,000 in Arizona income taxes are required to make estimated income tax payments at the same time they make their federal estimated tax payments.

For more information, visit the Arizona Department of Revenue website at http://www.azdor.gov. Their telephone number is 602-255-3381 or toll free 800-352-4090.



Property Tax

In Arizona, both real and personal property are subject to taxation. Taxes are classified as either primary or secondary.

- Primary taxes are used to meet most operating expenses of local jurisdictions.

- Secondary taxes are used to meet special obligations, such as payments of bonds and special district levies, as well as voterapproved overrides.

Commercial and industrial properties are "locally assessed" and the full cash value of these properties is set by the County Assessor.

Total property tax liability is calculated by adding primary and secondary taxes for all jurisdictions in which the property is located.

Real and personal property tax payments are collected by the County Treasurer.

Most businesses will be liable for taxes on both personal and real property. A certified public accountant can be a great resource to the small businessperson.

Taxes affect your cash flow significantly and thus to control your business finances, tax planning is very important.