Sales Tax Exemption Form

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Sales Tax & Use Tax

       Chunyan Pan
       Tax Manager
  Financial Services Office
    Sales Tax Defined

   Transaction Privilege Tax: tax imposed on
    vendors for the privilege of doing business in
   Vendors register as a merchant in AZ and
    have a AZ business license
   AZ vendors usually pass the tax on to the
    customers, but the vendors are ultimately
    liable for the tax (file sales tax return and
    remit the tax to the State)
 Sales Tax Rate

AZ State Tax:
 6.6% for most of the categories

  retail, restaurant, utilities, communic
  ations, job printing publication, and
  lease of personal property.

Sales Tax Rate
Pima County excise tax:
 0.5% for most of the classifications
  such as
  retail, restaurant, utilities, communic
  ations, job printing, publication.

Sales Tax Rate
Tucson city sales tax
   The University of Arizona DOES NOT charge
    city sales tax to its customers but pays to
    Tucson vendors if charged
   Tax rate is 2% for most of the
    classifications, such as retail, restaurant, job
    printing, publication, lease of personal
    property, and amusement
   4% for utilities and telecommunication

Sales Tax Rate: Summary
For most of the categories:
 State : 6.6%

 Pima County: 0.5%

 State & County Combined: 7.1%

 Tucson City*: 2%

  Applies when the University is a purchaser
  and purchase from a Tucson Vendor
Sales Tax Rate:
Transient Lodging
Transient Lodging Classification (Hotel
 State: 6.5%

 Pima County 0.55%

 Tucson City: 6%

 Total in Tucson: 13.05%

*varies if the hotel is located in different
  state, county and city
    Use Tax Defined

   Tax on the use, storage or consumption
    of tangible personal property in AZ
   AZ Purchasers are liable for the use tax
    on goods purchased from an out-of-state
    vendor which did not collect the use tax
    (out-of-state vendor may collect use tax)
   If the sales tax has been paid on the
    purchase, then exempt from use tax

    Use Tax Rate

   AZ State use tax rate is generally 6.6%
   Counties generally do not impose use
   The university is not subject to city use

    Tax at University of Arizona As a
   The University is NOT an exempt entity for AZ sales and use
    tax purpose

   The University of Arizona generally pays sales tax to the
    vendor or self-assesses use tax on its purchases if the vendor
    does not charge sales tax/use tax

   Specific exemptions may apply if in the AZ State Statutes – on
    a purchase-by-purchase basis

   If there is a sales tax exemption, then a corresponding use tax
    exemption generally also exists

Nontaxable/Tax-exempt Services

   Professional and personal services
   Repair, maintenance and installation services (if
    charges are separately stated on invoices and
   Warranty or service contract (if not required to
    purchase with the tangible personal
    property, and is charged separately on an
   Delivery charges (freight or shipping) if
    separately stated on the invoice
   Internet access and cable services
   Conference registration fees
   Professional membership dues                        11
    General Exemptions on Tangible
    Personal Property
   Machinery and equipment used in research and
   Chemicals used in research and development
   Printed and other media materials (available to the
    public) by UA Libraries
   Food for home (human) consumption
   Medically prescribed drugs, equipment or devices
   Purchase for retail
   Others as set forth in statutes such as ARS 42-5061
    or ARS 42-5159
Tax Exemption on Research Equipment
    Research does not include
      (1) social science

      (2) psychology

      (3) computer software development

      (4) non-technological activities or technical services

    Equipment does not include
       (1) expendable materials

       (2) office equipment, furniture and supplies

       (3) hand tools

       (4) janitorial equipment

       (5) licensed motor vehicles

       (6)shops, buildings, depots
    Tax Exemption on
    Research Equipment (Cont’d )

   Equipment should be used exclusively for
   Dollar amount does not necessarily affect
    the decision
   A repair or replacement part of a tax-
    exempt research equipment is exempt
   Leases and rentals of tax-exempt research
    equipment are exempt
   Exemption on Chemicals
   Used in Research

Research does not include
   (1) social science
   (2) psychology
   (3) computer software development
   (4) non-technological activities or technical services
Chemicals cannot be used or consumed in activities such as
packaging, storage or transportation
It is up to the researcher who orders the item to determine
whether it is “chemical”

    Supplies and Materials Used in Research
    – Generally NOT exempt

   If an item does not fit into “equipment
    used in research” or “chemical used in
    research,” it generally DOES NOT qualify
    for tax exemption.

     Computer Hardware, Software
     & Services
   Hardware: generally taxable
   Custom software is not taxable
   Pre-written software is taxable, regardless if it is
    CD-Rom or through digital means
   Computer services such as
    analysis, design, repair, support engineering are not
   Maintenance and warranty agreement for hardware
    and software: is generally not taxable if it is sold as
    a separate item and the price is stated separately
   Software maintenance agreement for canned
    updates, modification or revisions is taxable           17
       Internet Purchase

   Internet purchases are generally subject to Sales
    Tax or Use Tax

   Some companies charge sales tax on their online

   Other companies do not charge sales tax leaving
    the liability of use tax on the purchaser

         Apply for Tax Exemption
         with the Vendor
   Vendors usually charge sales tax on tangible personal
    property in absence of a Sales Tax Exemption
   The Tax Exemption Certificate should provide the
    University‟s Federal Tax ID (74-2652689), AZ Sales
    Tax License Number (20221243), and the reason for
   The Tax Exemption Certificate for a P-card purchase
    must be signed by the individual at the Department
    who authorizes the purchase
   Tax exemption certificate is located on eForms:


    Apply Exemption on Use Tax
   When an out-of-state vendor is registered to collect use
    tax, provide the Sales Tax Exemption Certificate to
    claim exemption on use tax with the vendor.
   If the vendor does not charge any sales or use
    tax, document the reason for the use tax exemption and
    keep in file (can use Sales Tax Exemption Certificate or
   Reconcilers must check the „service/tax exempt‟ box in
    PaymentNet to avoid paying Use Tax

Tax at University of Arizona As
a Seller
   Department „s responsibility (1) identify
    the taxable sales, collecting the sales and
    tax revenues and depositing the revenues
    to the University accounts; (2) maintain
    detailed records of sales activities.
   FSO „s responsibility: prepare Sales Tax
    return and remit the tax receipts to the
    State of Arizona
Common Tax Exemptions on
    Professional or Personal Services
    Sales to vendors for resale
    Freight or shipping if separately stated on the invoice
    Sales to a non-resident for use outside Arizona when the retail
    item is shipped or delivered the outside Arizona.
    Textbooks required for course work sold by bookstore
    Sales or renting to nonprofit or state-operated hospitals and
     healthcare facilities (must have an Exemption Letter issued by AZ
     department of revenue)
    A certain food sales, including vending machine food, student meal
     tickets and patient food
    Others as set forth in ARS 42-5061 or ARS 42-5159
Special Case: Retail Sales to Out-of-State

        If an order is called in by an out-of-state
         purchase and delivered directly to the out-of-
         state address, the sales are tax-exempt: must
         maintain the proper shipping documentation

        If the out-of-state customer picks up the
         merchandise in AZ, sales are taxable unless the
         purchaser has proof of out-of-state residence and
         the merchandise is shipped out of State for use
         out of State. The department must maintain
         appropriate exemption certificate provided by
         the purchaser.
   If the item (e.g. newspapers, magazines,
    journals) is published in AZ, the publisher is
    liable for sales tax even the customer subscribe
    from out-of-state

   Books are under retail category so sales tax is
    exempt on out-of-state sales

Special Case:
Sales to Federal Government

   Retail sales are taxable at one-half of the
    regular tax rate (3.55%).
   Exempt on products sold directly to the
    US government as a manufacturer,
    modifier, assembler or repairer of such
     AZ Sales and Use Tax

Contact Information
   For assistance to determine the taxability
    of a purchase/sales:
    Chunyan Pan, Tax Compliance 621-1957

   For assistance to record the
    purchase, sales and related tax; correction
    of use tax:
    Fred Pearson, Financial Management 621-


Description: Sales Tax Exemption Form document sample