Steve Newmark 2013-03-06 00:21:28
Overview of Arizona Use Tax A certified tax specialist since 1991, Steve Newmark is a highly respected and experienced lawyer who practices in three legal fields: state and local taxation, estate planning and probate. Newmark has been a member of the Arizona Bar since 1977 and served as chair of the state bar tax section. Newmark is certified as a tax specialist by the Arizona Bar. For more information call (602) 274-7552 or visit www.newmarklawfirm.com. In addition to the transaction privilege tax, which is a tax on the privilege of doing business in Arizona, the state imposes a use tax, which is an excise tax on the storage, use, or consumption in Arizona of tangible personal property purchased from an out of state retailer. There is a presumption that personal property purchased by a person outside Arizona and brought into this state is purchased for storage, use, or consumption in Arizona. A.R.S. § 52-5152. Many Arizona cities and towns also impose a use tax. The use tax went into effect in 1956, having been adopted at a special legislative session in 1955 called by Governor Ernest W. McFarland: “I do not consider [the use tax] to be an additional tax but merely an equalization of taxes. The people who sell goods in this State should be protected from inequities which result without a use tax.” Arizona Session Laws 1955, 2nd S.S., Ch. 1, § 3. The use tax is found in A.R.S. § 42-5155: A. There is levied and imposed an excise tax on the storage, use or consumption in this state of tangible personal property purchased from a retailer or utility business, as a percentage of the sales price. B. The tax imposed by this section applies to any purchaser which purchased tangible personal property for resale but subsequently uses or consumes the property. C. The tax rate shall equal the rate of tax prescribed by § 42-5010, subsection A as applied to retailers and utility businesses according to the respective classification under articles 1 and 2 of this chapter for the same type of transaction or business activity. The use tax is the obverse of the transaction privilege tax, which is imposed on the retail sale of personal property in Arizona. However, like the transaction privilege tax, the use tax is not due on casual sales. An Arizona purchaser who uses, stores or consumes personal property is liable to pay use tax on goods purchased from an out-of-state retailer if the retailer does not pay the Arizona use tax or a similar excise tax to the retailer’s home state. A.R.S. § 42- 5155(E). If the excise tax on the sale is paid to another state, Arizona use tax is still due if and to the extent the other state’s excise tax rate is less than Arizona’s use tax rate. Not all personal property purchased from an out of state retailer that is brought into Arizona is subject to use tax, however. The tax does not apply if the purchaser was not an Arizona resident at the time of purchase, or if the first actual use or consumption of the personal property occurs outside Arizona, and the personal property is not used in conducting a business. When the personal property is a vehicle purchased from an out of state retailer, the Arizona Department of Transportation will not register the vehicle unless the resident presents proof that tax was paid in the state of purchase and that the amount of tax paid is equal to or greater than the Arizona use tax rate. If tax was not paid in the state of purchase or was less than the Arizona use tax, ADOT requires that the use tax be paid at the time the vehicle is registered. The state use tax rate is equal to the state transaction privilege tax rate. However, the person subject to use tax is not required to pay county tax on the purchase. The use tax code provides many of the exemptions provided by the transaction privilege tax code. For example, the use tax does not apply to a. tangible personal property purchased for resale in the regular course of business and not for consumption or use by the purchaser; b. tangible personal property on which the Arizona transaction privilege tax has already been paid; c. tangible personal property, the sale or use of which has already been subject to an equal to or greater excise tax under the laws of some other state; d. tangible personal property that directly enters into and becomes an ingredient or component of a manufactured, fabricated or processed article, substance or commodity for sale in the regular course of business; e. tangible personal property purchased by a person with a valid transaction privilege tax license for engaging in the contracting business if the tangible property sold is incorporated or fabricated into a structure, project, development or improvement in fulfillment of a contract; f. tangible personal property brought into Arizona by an individual who was a nonresident when the property was purchased for the individual’s own storage, use or consumption if the first actual use or consumption of the property was outside the state, unless the property is used in conducting a business in Arizona; or g. tangible personal property not exceeding $200 in any one month purchased by an individual at retail outside the continental limits of the United States for personal use and enjoyment. Whether use tax applies to transactions involving out-of-state parties may present federal constitutional provisions. This subject will be covered in a later posting.
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