Wednesday, May 29, 2013

Arizona Sales Tax Changes

In 2010, voters in the State of Arizona approved a Temporary Sales Tax of 1%.  This tax was approved for a period of three (3) years, beginning June 1, 2010 and ending May 31, 2013.  In November, 2013, an initiative appeared on the ballot to make this Temporary Tax a permanent tax.  It was soundly defeated by the voters in Arizona.  As a result, the Temporary Tax of 1% will expire on May 31, 2013.  The result being that the state wide sales tax in Arizona will drop by 1% on June 1, 2013.

Currently, the Arizona Transaction Privilege Tax (more commonly known as the sales tax) will drop from 6.6% of taxable sales to 5.6% of taxable sales.  Many counties in Arizona, including Pima County, have enacted an additional 0.5% (1/2%) sales tax in addition to the state tax.  Since this is collected by the Arizona Department of Revenue, the effective rate in Pima County is currently 7.1% and will drop to 6.1% on June 1, 2013.

What does this all mean?  For consumers, the sales taxes you pay on purchases will drop by 1%.  For purchases made in Tucson Arizona, the combined State/County and City of Tucson tax rate drops from 9.1% to 8.1% on June 1.  For a purchase of $100.00, the sales tax will drop from $9.10 to $8.10.  For the merchant, the rate of tax collected will therefore drop.  This means that effective Saturday, June 1, all merchants will need to reduce the taxes by 1%.  This will most likely require a reprogramming or correction to the tax section of your cash registers or computer programs to reflect the corrected rate.

What happens if a merchant forgets to adjust the tax rate?  The merchant DOES NOT realize an additional profit if they forget to adjust their tax tables.  The excess amount collected still must be paid to the state or city.  Each jurisdiction has a section on their sales tax reports to show "excess taxes collected."  This is where the merchant is required to report any excess taxes collected in error.

Please contact me if you have any questions concerning this issue.

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