What You Need to Know About New Ecommerce Sales Tax Laws in Arizona
Like other places across the country, shopping in Arizona today is far different than it once was. Convenient shopping from home and delivery of purchases, in some instances as soon as the next day, has lured shoppers out of brick and mortar stores and into the world of ecommerce. With the constant growth of online shopping, more people buy products from companies located outside their state than ever before. For a long time, these purchases didn’t require sales tax, which was an added bonus. However, on June 21, 2018, the Supreme Court ruling in South Dakota v. Wayfair, Inc. changed the rules. This court decision enables states to collect tax on remote sales.
What Is The Remote Seller Nexus?
Beginning in 2008, states began enacting various provisions that require remote sellers to collect sales tax or to provide information about in-state buyers. The provisions that affect these transactions are called the “Remote Seller Nexus.” A business needs to have a connection with a state, or a nexus, if the state is to require that business to collect and remit sales tax. Under the new laws, states may require businesses to do so, based on their transactions and/or sales volumes in the state, whether they have a physical presence in the state or not. The term for this is economic nexus.
How This Ruling Affects Websites and Sales Tax
Forty-five states require retailers to charge a general sales tax. A large majority of states, as well as the District of Columbia, plan to use the South Dakota v. Wayfair, Inc. ruling to their benefit in requiring online businesses to charge and remit sales tax. Some of these states are already enforcing these laws. Economic Nexus came online in five states as of October 1, 2019. If you operate a business that provides out-of-state sales, you likely need to start charging sales tax for at least a few of the states in which you sell goods.
Rules for Businesses Selling in Arizona
As of October 1, 2019, companies making sales in Arizona are subject to the economic nexus if their gross sales meet a certain threshold. Arizona will use a graduated approach for their economic nexus threshold. The threshold was $200,000 for 2019 but drops to $150,000 in 2020 and to $100,000 in 2021. They are the first state to use this method. As the threshold is met, the seller must get a TPT license. On the first day of the month beginning at least 30 days after the threshold is met, the seller must begin remitting sales tax for online sales. They must continue to do so for the remainder of the year and throughout the next calendar year.
Only sales that are not facilitated through a marketplace provider are counted toward the threshold in Arizona. A marketplace provider, or facilitator, is someone who aids in retail sales by listing or advertising items in a marketplace and collects payment via third parties. Sales by all affiliated persons will be aggregated together as one business entity.
Simplifying Online Sales Tax for Your Company
Keeping track of these online sales tax rules is a difficult undertaking, and complying with the new regulations may affect your business’ bottom line. Knowing Arizona’s new ecommerce sales tax rules is essential, but carrying them out without error is not easy. Any mistake can lead to further problems and further costs to your business. Lucky for you, Forix has partnerships with online tax service providers to assist in managing the collection and remittance of internet sales tax. These providers make the entire process more efficient for your company, cutting down on compliance costs and eliminating fines due to errors. The software these providers use collects sales data, fill out and files the appropriate forms, and remits the tax to the state.
If your ecommerce business sells to buyers in Arizona, be aware of the new Remote Seller Nexus laws that have gone into effect after the 2018 South Dakota v. Wayfair, Inc. ruling. If your sales in Arizona met the threshold of $200,000 in 2019, or if you project that they will reach $150,000 in 2020, you must charge and remit sales tax on these gross sales. Collecting sales tax online doesn’t have to be a burden on your operations. Contact Forix today to find out exactly how we can help you make this process easy and worry-free, saving you money in compliance costs and potential fines, and benefitting your business revenue.
Disclaimer: The information in this blog post is provided for general informational purposes only and should not be construed as legal advice from Forix.