Arizona’s Transaction Privilege Tax (TPT) can be complex. This guide breaks down the retail classification, specifically focusing on Aa 5061, outlining what’s taxable and exempt under this code. Understanding these details is crucial for businesses operating within Arizona.
What is AA 5061: Retail Classification?
AA 5061 defines the retail classification for TPT purposes as the business of selling tangible personal property at retail. The tax base is the gross proceeds of sales or gross income. However, there are numerous exemptions.
Exemptions Under AA 5061
The following are exempt from the retail classification tax:
Services and Specific Goods
- Professional or personal services where tangible property sales are inconsequential.
- Services provided in addition to retail sales.
- Warranty or service contracts (though product use under these contracts may be taxable under section 42-5156).
- Nonprofit organizations recognized under IRS section 501(c)(3).
- Restaurant sales of food, drink, or condiments.
- Activities falling under other taxable business classifications.
- Stocks and bonds.
- Prescribed drugs and medical oxygen equipment.
- Prosthetic appliances (as defined in section 23-501) prescribed by licensed health professionals.
- Insulin, insulin syringes, and glucose test strips.
- Prescription eyeglasses and contact lenses.
- Hearing aids (as defined in section 36-1901).
- Durable medical equipment meeting specific Medicare criteria.
Specific Sales Scenarios
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Motor vehicle sales to nonresidents for out-of-state use under specific conditions.
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Food (subject to conditions in article 3 of this chapter and sections 42-5074 and 42-6017).
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Items purchased with USDA food assistance coupons.
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Required textbooks sold by bookstores to university or community college students.
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Free food and drink provided to employees by restaurants.
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Food and drink sold to schools for on-premises consumption during school hours.
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Lottery tickets.
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Cash equivalents, precious metal bullion, and monetized bullion (with specific exceptions for manufactured jewelry or art).
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Motor vehicle fuel subject to taxes under title 28, chapter 16, article 1. This includes exceptions for aviation fuel (section 28-8344) and jet fuel (article 8 of this chapter).
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Tangible personal property sold to leasing or renting businesses.
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Interstate or foreign commerce sales prohibited from taxation by the US or Arizona constitutions.
Sales to Qualifying Organizations
- Qualifying hospitals (as defined in section 42-5001).
- Qualifying health care organizations providing specific services.
- Qualifying community health centers (as defined in section 42-5001).
- Specific nonprofit charitable organizations.
- Qualifying health sciences educational institutions (as defined in section 42-5001).
Other Exemptions
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State publications encouraging tourism.
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Property incorporated into real property projects under specific conditions (section 42-5075 and 42-5009).
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Motor vehicle sales to nonresidents under specific residency and registration conditions.
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Property used by certain nonprofits in programs for individuals with disabilities.
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Sales by nonprofits associated with major league baseball or professional golf under specific conditions.
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Commodity sales consigned for resale in regulated commodity markets.
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Sales by nonprofits sponsoring rodeos under specific conditions.
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Propagative materials for commercial agricultural use (with exceptions for cannabis).
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Assistive devices for individuals with disabilities.
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Natural gas or liquefied petroleum gas used for vehicle propulsion.
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Paper machine clothing used in paper manufacturing.
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Specific energy resources sold to qualified environmental technology manufacturers.
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Chemicals used in specific manufacturing processes.
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Personal property liquidation transactions under specific conditions.
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Food, drink, and condiment sales to correctional institutions.
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Motor vehicles and parts sold to leasing or renting motor carriers.
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Livestock, poultry, and related feed and supplies.
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Motor vehicle sales at auction to nonresidents under specific conditions.
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Specific items provided to transient lodging guests.
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Alternative fuel sales to permitted used oil fuel burners.
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Materials purchased by publicly funded libraries.
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Food, beverages, and condiments provided to airline passengers.
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Alternative fuel vehicles and conversion equipment.
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Liquor sales by licensed wholesalers.
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Property incorporated into environmental remediation projects.
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Sales by nonprofits organizing cultural or civic events.
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Application services for educational assessment or curriculum development.
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Specific fuel and repair part sales for qualified forest product businesses.
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Renewable energy credits.
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Orthodontic devices dispensed by licensed dental professionals.
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Property incorporated into projects on Indian reservations under specific conditions.
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Fine art sales to nonresidents under specific conditions.
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Sales by marketplace sellers facilitated by marketplace facilitators remitting taxes.
Additional Deductions and Considerations
AA 5061 also outlines deductions for specific machinery, equipment, and materials used in various industries like manufacturing, mining, telecommunications, power generation, and more. The code further clarifies exclusions related to federal excise taxes, wholesale sales, and sales to the US government.
Conclusion
Navigating AA 5061 is essential for accurate TPT compliance. This overview highlights key taxable and exempt activities, providing a foundation for understanding this complex aspect of Arizona tax law. Consulting with a tax professional is recommended for specific business circumstances.
