Arizona Sales Tax (TPT) Guide for SaaS and E-Commerce Businesses

Arizona imposes a Transaction Privilege Tax (TPT) — a tax on the seller for the privilege of doing business in the state. In practice, sellers generally pass the cost on to customers, so it operates the same as a sales tax.

This guide explains Arizona’s SaaS taxability, nexus thresholds, filing rules, and how to register.

Last updated: September 2025

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Quick Reference: Arizona TPT (2025)

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SaaS & Software Taxability in Arizona

Arizona taxes SaaS, digital goods, and software under its TPT rules. Even though the statutes don’t explicitly list SaaS, the Arizona courts and ADOR rulings have consistently treated SaaS as tangible personal property (ADOR Digital Goods Guidance, 2017).

What This Means for SaaS

• SaaS, cloud access software, and hosted digital licenses — taxable
• Custom-developed, one-off software — potentially exempt if clearly itemized, since it's viewed as a professional service rather than a taxable product.
• Bundled offerings (software + services) — the software portion remains taxable, and the entire bundle may be taxed.

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Who Must Collect Arizona TPT?

You must collect Arizona TPT if you meet any of the following:

• Physical nexus: Employees, offices, warehouses, inventory, or contractors in Arizona.
• Economic nexus: More than $100,000 in annual gross sales into Arizona (current or prior year).
• Marketplace facilitator rules: Marketplaces like Amazon, Etsy, and Shopify must collect TPT on your behalf, but you may still need to register if you also make direct sales.

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What’s Taxable in Arizona?

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Local Jurisdictions & Rates

• State rate: 5.6%
• Local rates: 0.5–6% depending on city/county
• Combined maximum: ~11.2% in some municipalities

Use the official AZDOR rate lookup to confirm the rate for each jurisdiction.

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Filing & Due Dates

• Filing frequency: Monthly (most businesses), or quarterly/annual for small sellers.
• Due date: Returns and payments due by the last day of the month following the reporting period.

Example: April sales → file and pay by May 31.

File online at AZTaxes.gov.

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Penalties & Interest

• Late filing penalty: Up to 4.5–5% of tax due per month, capped at 25%.
• Late payment penalty: 0.5% per month, capped at 10%.
• Interest: Accrues daily at the IRS rate + 3%.

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How to Register for Arizona TPT

1. Determine nexus (economic or physical).
2. Register online via AZTaxes.gov or through the Arizona Dept. of Revenue.
   • You may also need city/county TPT licenses (~$12 each) if doing business in multiple jurisdictions.
3. Renew annually: Arizona TPT licenses must be renewed each year.
4. File & remit: Returns filed through AZTaxes.gov.

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FAQs: Arizona Sales Tax (TPT)

Is SaaS taxable in Arizona?
Yes, SaaS and software subscriptions are taxable as tangible personal property.

What is Arizona’s economic nexus threshold?
$100,000 in annual gross sales into Arizona.

Does Arizona have a sales tax?
Not technically — it’s a Transaction Privilege Tax (TPT), but businesses typically pass it on to customers.

When are TPT returns due?
By the last day of the month following the reporting period.

Do I need to register if I only sell through Amazon or Shopify?
Marketplaces must collect on your behalf, but you may still need to register if you make direct sales.

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Official Arizona Resources

• Arizona Dept. of Revenue — TPT Overview
• AZTaxes.gov — File & Pay Online
• Transaction Privilege Tax Rate Tables
• Remote Seller & Marketplace Guidance
• Private Taxpayer Ruling LR11-011 (Hosting = Taxable)