Tuesday, August 2, 2011

Arizona "Use" Tax Crack Down

What is "Use" tax and why should I care? Use tax is the equivalent of sales tax in Arizona for items purchased from online or out of state vendors in which no sales tax or a lesser amount than the Arizona rate was charged to the consumer. With the increase in online purchases, the state has had a loss of sales tax revenue.

The application of Use tax has been on the books for many years but has not been formally imposed on the general public. Many retail businesses have had a Use tax reporting requirement that is reported with their normal sales tax (TPT - transaction privilege tax) reporting.

For the 2011 tax year, the Arizona legislature has now formally cracked down on this issue for individuals by requiring reporting as part of the Arizona income tax return. Individuals will need to report the amount of purchases that had no sales tax charged and then will need to remit the amount with their tax return.

As of my writing, I am not aware of the specifics of how the Arizona Department of Revenue will implement this requirement but as more information becomes available, I will share with clients and interested parties.