Arizona Sales Tax Guide for SaaS and E-Commerce Businesses 2026

Arizona imposes a Transaction Privilege Tax (TPT), a tax on the seller for the privilege of doing business in the state. Sellers typically pass this cost on to customers, so it functions like a sales tax.

This guide covers Arizona SaaS sales tax rules, remote seller nexus thresholds, filing requirements, and registration steps. The information reflects the December 2024 TPR 24-1 ruling on nexus.

Last updated: Jan 2026

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Arizona TPT Quick Reference for 2026

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Arizona SaaS Sales Tax Rules

Arizona taxes SaaS, digital goods, and software under its TPT system. The tax classification determines how nexus rules apply to your business.

SaaS Subscriptions vs. Software Sales

TPR 24-1 (December 2024) explains how Arizona classifies software transactions:

• SaaS subscriptions and cloud-based software access fall under the personal property rental classification
• One-time software sales fall under the retail classification
• Custom-developed software may be exempt if itemized as a professional service
• Bundled software and services may be fully taxable

The classification matters because Arizona economic nexus thresholds apply only to the retail classification. SaaS subscription revenue does not count toward the $100,000 economic nexus threshold.

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Arizona Remote Seller Sales Tax and Nexus Rules

Arizona TPR 24-1 establishes two types of nexus with different tax consequences.

Physical Nexus (All TPT Classifications)

Physical nexus applies to all TPT classifications, including personal property rentals like SaaS. You have physical nexus if you have ongoing activities in Arizona that help establish or maintain your market in the state:

• Employees working in Arizona, including remote workers in sales, marketing, or customer service roles
• Offices, warehouses, or inventory in Arizona
• Contractors or agents soliciting sales on your behalf in Arizona
• Leased equipment or servers physically located in Arizona
• Affiliate marketing agreements with Arizona residents

If you have physical nexus, you owe TPT from the first dollar on all applicable business classifications. There is no threshold.

Economic Nexus (Retail Classification Only)

Arizona remote seller sales tax rules for economic nexus apply only to the retail classification. You have economic nexus if:

• You are a remote seller or marketplace facilitator, and
• Your retail sales to Arizona customers exceed $100,000 annually (gross, before any deductions)

Only retail classification income counts toward this threshold. Personal property rental income, including SaaS subscriptions, does not count toward economic nexus.

Marketplace Facilitator Rules

Marketplaces like Amazon, Etsy, and Shopify collect TPT on your behalf for sales through their platforms. You may still need to register if you make direct sales outside these platforms.

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Arizona SaaS Sales Tax Nexus Examples

These examples from TPR 24-1 show how Arizona SaaS sales tax nexus works in practice.

Example 1: SaaS Company Without Physical Presence

An out-of-state SaaS company with no physical presence in Arizona earns $250,000 from monthly cloud software subscriptions to Arizona customers.

Result: The company does not have economic nexus with Arizona. SaaS subscriptions are classified as personal property rentals, and only retail sales count toward the $100,000 economic nexus threshold.

Example 2: SaaS Company With Retail Software Sales

The same company also sells perpetual software licenses (retail sales) totaling $150,000 to Arizona customers.

Result: The company has economic nexus because the $150,000 in retail sales exceeds the threshold. TPT applies only to the retail sales, not the SaaS subscription revenue.

Example 3: Retail Sales With Service Components

A company has $150,000 in software-related gross income, but $60,000 comes from exempt services. Only $90,000 is taxable under the retail classification.

Result: The company still has economic nexus because the threshold is based on gross income ($150,000) prior to any statutory deductions, not the taxable amount.

Example 4: Physical Server Creates Physical Nexus

A Utah-based company rents a physical server to an Arizona customer. The server is located in Arizona.

Result: The company has physical nexus due to property located in the state. All Arizona transactions, including SaaS subscriptions, are subject to TPT from the first dollar.

Example 5: Remote Employee May Create Physical Nexus

An out-of-state software company has a remote employee living in Arizona.

Result: It depends on the employee's role. A bookkeeper or general admin would likely not create physical nexus. An employee in sales, marketing, or customer service would create physical nexus because those functions help establish and maintain the company's market in Arizona.

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What Is Taxable Under Arizona TPT?

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Arizona Local Tax Rates

• State rate: 5.6%
• Local rates: 0.5% to 6% depending on city and county
• Combined maximum: approximately 11.2% in some municipalities

A business with nexus in Arizona has nexus with all municipalities where its sales are sourced within the state.

Use the AZDOR rate lookup to find the rate for each jurisdiction.

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Arizona TPT Filing Deadlines

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

Example: April sales are due by May 31.

File online at AZTaxes.gov.

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Arizona TPT Penalties and Interest

• Late filing penalty: Up to 4.5% to 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 plus 3%

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How to Register for Arizona TPT

1. Determine nexus: Do you have physical nexus (any classification) or economic nexus (retail only)?
2. Register online at AZTaxes.gov or through the Arizona Dept. of Revenue
3. Obtain city and county TPT licenses (approximately $12 each) if doing business in multiple jurisdictions
4. Renew annually: Arizona TPT licenses must be renewed each year
5. File and remit returns through AZTaxes.gov

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Arizona SaaS Sales Tax FAQ

Is SaaS taxable in Arizona?

Yes. SaaS is taxable under the personal property rental classification. However, SaaS revenue does not count toward the $100,000 economic nexus threshold. That threshold applies only to retail sales. SaaS companies without physical presence in Arizona may not owe TPT even with significant Arizona revenue.

What is Arizona's economic nexus threshold for remote sellers?

$100,000 in annual gross retail sales into Arizona. This threshold applies only to the retail classification. It does not include income from other classifications like personal property rentals (SaaS) or job printing.

Does Arizona have a sales tax?

Arizona has a Transaction Privilege Tax (TPT) rather than a traditional sales tax. Businesses typically pass the cost to customers, so it functions the same way.

When are Arizona TPT returns due?

Returns are 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 collect TPT on your behalf for sales through their platforms. You may still need to register if you make direct sales.

Does a remote employee in Arizona create nexus?

It depends on their role. Employees in sales, marketing, or customer service functions create physical nexus. Employees in general administrative roles like bookkeeping do not create nexus by themselves.

If I have physical nexus, does the $100,000 threshold apply?

No. Physical nexus means you owe TPT from the first dollar on all applicable classifications. There is no threshold for businesses with physical nexus.

Do SaaS sales count toward Arizona economic nexus?

No. SaaS subscriptions are classified as personal property rentals, not retail sales. Only retail sales count toward the $100,000 economic nexus threshold.

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Arizona TPT Resources

• Arizona Dept. of Revenue: TPT Overview
• AZTaxes.gov: File and Pay Online
• Transaction Privilege Tax Rate Tables
• Remote Seller and Marketplace Guidance
• TPR 24-1: Nexus Ruling (December 2024)
• Model City Tax Code