Arizona Announces Economic Nexus Requirements
Arizona is joining the 40-plus states enforcing economic nexus requirements on remote sellers. These requirements will take effect October 1, 2019. The bill (AZ HB 2757) also stipulates new requirements for marketplace facilitators.
Arizona Economic Nexus Thresholds
Starting this year, remote sellers who accumulate more than $200,000 of sales in the previous or current calendar year must collect and remit the state's transaction privilege tax. Sales are measured as in-state gross proceeds of sales or gross income derived from business in the state. These totals should exclude sales made through marketplace facilitators.
Arizona is adopting a sliding scale sales requirement over the next three year period with the sales threshold decreasing each year. Remote sellers need to track their Arizona sales using these benchmarks which trigger economic nexus:
- More than $200,000 of sales during calendar year 2019
- More than $150,000 of sales during calendar year 2020
- More than $100,000 of sales during calendar year 2021
- More than $100,000 of sales during each calendar year beyond 2021
Marketplace Facilitator Requirements
Marketplace facilitators must collect and remit Arizona's transaction privilege tax on behalf of third-party sellers beginning October 1, 2019 if their in-state sales exceed $100,000 annually. This threshold is measured by combining the marketplace facilitator's direct sales in Arizona plus in-state sales made by third-party sellers on the facilitator's marketplace. Back in 2016, the Department of Revenue ruled that online marketplaces with Arizona nexus were responsible for collecting and remitting tax. This new legislation codifies that rule.
If a remote seller meets the sales threshold in the previous year, that seller must register with Arizona and begin immediately to collect and remit the transaction privilege tax. An out-of-state seller who reaches the sales threshold in the current calendar year has a 30-day grace period from the date the threshold is met to the date that state registration must be completed and tax collection must begin.
Get a complete list of states with economic nexus and marketplace facilitator requirements by downloading Cherry Bekaert's Nexus Charts:
If you want more information about economic nexus or you have questions, please visit the Cherry Bekaert website.