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ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
AMENDED
TPT; sourcing; validation
Purpose
Requires, by January 1, 2026, the Arizona Department of Revenue (ADOR) to establish a certification process for third-party providers who offer sourcing services to taxpayers for transactions involving tangible personal property and outlines how liability is determined for sourcing errors.
Background
Transaction privilege tax (TPT), commonly referred to as a sales tax, is a tax on vendors for the privilege of doing business in Arizona. A person who desires to engage or continue in business and who receives gross proceeds of sales or gross income subject to TPT must annually apply to ADOR for a TPT license.
Current statute requires retail sales of tangible personal property to be sourced to: 1) the seller's business location, if the seller receives the order at a business location in Arizona; or 2) the purchaser's location in Arizona, if the seller receives the order at a business location outside the state of Arizona or, if there is no delivery address, to the purchaser's billing address. An order is received when all the information necessary to accept the order has been received by or on behalf of the seller, regardless of where the order is accepted or approved. The place of business or residence of the purchaser does not determine where the order is received. Tangible personal property is personal property that may be seen, weighed, measured, felt or touched or that is in any other manner perceptible to the senses (A.R.S. §§ 42-5001; 42-5005; and 42-5040).
The Joint Legislative Budget Committee issued a fiscal note for the House Engrossed version of H.B. 2382 which estimated that the bill would generate additional workload for ADOR. ADOR projected a fiscal impact of $3,600,000. However, the Senate Finance and Commerce Committee adopted an amendment to remove the reporting requirements and program implementation. Since the fiscal note did not delineate the cost for each portion of H.B. 2382, the fiscal impact is unknown at this time (JLBC Fiscal Note).
Provisions
1. Requires ADOR, by January 1, 2026, to establish a process that authorizes third-party providers who offer sourcing services to taxpayers for transactions involving tangible personal property to obtain certification in Arizona.
2. Requires a certified third-party service provider to meet all ADOR-established requirements.
3. Allows a taxpayer to use a certified third-party service provider to assist the taxpayer in sourcing transactions involving tangible personal property.
4. Requires the Director of ADOR to:
a) supervise and regulate all third-party providers required to obtain certification;
b) establish minimum standards for certification and a quality assurance program for authorized third parties to ensure that a certified third-party service provider complies with minimum standards;
c) post a list of certified third-party service providers on ADOR's website; and
d) adopt rules for certification administration and enforcement.
5. Allows the Director of ADOR to:
a) investigate and audit third-party service providers as necessary to ensure compliance; and
b) require that a certified third-party service provider or any employees or agents of the provider be certified by ADOR to perform certain functions.
6. Allows a person to apply to ADOR to be a certified third-party service provider on a form prescribed and furnished by the Director of ADOR and requires a certification applicant to submit all documents and fees with the application containing:
a) the applicant's name, telephone number and address and the primary contact person;
b) verification that the applicant meets the Director-prescribed requirements; and
c) other information required by the Director of ADOR.
7. Immunizes a taxpayer that uses a certified third-party provider for sourcing transactions involving tangible personal property from liability for failing to pay the correct amount of tax due to an error in sourcing the transaction.
8. Deems a taxpayer liable for failing to pay the correct tax amount if the failure was due to an error other than an error in sourcing the transaction.
9. Subjects a certified third-party service provider to liability for the amount of tax a taxpayer failed to pay due to an error in sourcing the transaction, unless the error was due to incorrect information the certified third-party provider received from ADOR.
10. Becomes effective on the general effective date.
Amendments Adopted by Committee
1. Removes the requirement for ADOR to establish a Taxpayer Assistance Team and Taxpayer Education Campaign.
2. Removes the modification of the sourcing of retail sales of tangible personal property.
House Action Senate Action
WM 1/24/24 DPA 8-1-0-1 FICO 3/18/24 DPA 4-0-3
3rd Read 2/21/24 55-0-4-0-1
Prepared by Senate Research
March 19, 2024
MG/AB/cs