by August 7, 2020

    Most US states consider grocery items to be fully or partially sales tax exempt, while also considering prepared foods like hot restaurant meals to be taxable. Arizona is no exception. That’s even though they call their version of sales tax “Transaction Privilege Tax (TPT)”. This post will  go over when retailers should and should not charge sales tax on food sales in Arizona

    Are groceries taxable in Arizona?

    Groceries are generally exempt from Arizona’s TPT. According to the Arizona Department of Revenue, any food that falls within the guidelines of the Food Stamp Act of 1977 , or that would have fallen into that bill’s purview should the food item have existed at that time, are TPT exempt.

    This includes necessary grocery items like produce, meat and bread, but does not include things like alcohol.

    Further, many states make exceptions and tax items like snack food or candy, but Arizona considers candy, gum,bagged or wrapped snack foods and beverages sold in their  original containers to be exempt from statewide TPT, too.

    While the state considers groceries tax exempt, according to a recent news article, all but about 20 Arizona cities currently tax grocery items . However, the major cities of Phoenix, Mesa and Tucson do not consider groceries taxable.

    To sum it up, if you sell groceries in Arizona you are not required to charge the state’s TPT, but you may be required to charge a locality’s sales tax rate. Check out our Arizona TPT Guide for more info on collecting sales tax in Arizona.

    Read more about grocery taxability in Arizona Publication 575.

    Are meals taxable in Arizona?

    Prepared food, including hot meals or deli meals like sandwiches, are generally always taxable in Arizona

    Arizona considers prepared food to be: 

    • hot or cold sandwiches
    • food served by an attendant to be eaten at tables, chairs, benches, etc. or within parking areas for in-car consumption
    • food served with trays, glasses, dishes or other tableware
    • beverages sold in cups, glasses or open containers
    • food sold by caterers
    • food sold within the premises of theaters, exhibitions, concerts, places of amusement, and any businesses that charge for admission

    For the most part, if you sell prepared meals at a restaurant, pushcart or food truck, those items are taxable.  You can learn more about prepared food taxability in Arizona Publication 575 .

    Are beverages taxable in Arizona?

    Arizona also considers coffee, coffee substitute, tea, soft drinks and sodas to be TPT exempt. However, keep in mind that individual jurisdictions might impose a sales tax on these items. 

    How to Always Collect the Correct Amount of Sales Tax in Arizona

    Do you sell groceries, meals or beverages? Are you required to collect sales tax in Arizona? Then this may sound like a huge headache. 

    That’s where TaxJar can help. 

    With the TaxJar API , you can be sure you’re collecting the right amount of sales tax on every transaction. Our product tax codes ensure you do collect sales tax on that soft drink but don’t collect sales tax on that plain coffee drink. 

    Not to mention, most eCommerce businesses have nexus in multiple states. For example, groceries are taxable in some states, but non-taxable in others. Or, like Arizona, they are non-taxable at the state level but taxable at the local level. With TaxJar, you’ll collect the right amount of sales tax from every customer, in every state, every time.

    Further food and meal taxability resources:

    • Sales Tax by State: Are grocery items taxable? 
    • Sales Tax by State: To-Go Restaurant Orders
    • Is the food I sell on my food truck taxable? 
    • Arizona Sales Tax Guide for Businesses

    Ready to automate sales tax collection, reporting and filing? Click here for more on how TaxJar can take the headache out of sales tax in your food & beverage business .

    Are groceries taxed in Arizona?
    Food items sold by a qualified retailer and intended for home consumption are exempt by law from the Arizona transaction privilege tax. Food sold and intended for on- premises consumption, such as restaurant sales, remains fully taxable. more
    Does Arizona tax federal retirement income?
    Arizona does not impose state tax on two types of federal retirement income: Social Security and Railroad Retirement benefits. In addition, up to $2,500 of retirement payments from federal civil service -- as well as other types of Arizona-based civil service retirement income -- are exempt. more
    Does Arizona tax Social Security benefits?
    Your state tax bill in Arizona will depend greatly on the sources of your retirement income. Arizona, rated by Kiplinger as one of the nation's most tax-friendly states, does not tax your Social Security benefits (unlike these states that do). more
    Does Arizona tax federal pensions?
    Additionally, as a general rule, the same portion of an individual's pension is taxable for Arizona purposes as it is for federal. Arizona does allow, however, a subtraction for pensions from the state of Arizona, its political subdivisions or from U.S. government service, including the U.S. military. more
    Does Arizona have state income tax?
    Similar to federal income taxes, Arizona income tax rates are based on adjusted gross income and your filing status. The Arizona income tax rates range from 2.59% to 4.50%, with higher brackets paying higher income tax rates. more
    Does Arizona tax Social Security?
    Arizona, rated by Kiplinger as one of the nation's most tax-friendly states, does not tax your Social Security benefits (unlike these states that do). more
    What is Arizona property tax rate?
    The state of Arizona has relatively low property tax rates, thanks in part to a law that caps the total tax rate on owner-occupied homes. The average effective tax rate in the state is 0.62%, which is well below the 1.07% national average. more
    Is Arizona a low tax state?
    Arizona has a graduated individual income tax, with rates ranging from 2.59 percent to 4.50 percent. Arizona has a 4.90 percent corporate income tax rate, a 5.60 percent state sales tax rate, a max local sales tax rate of 5.60 percent, and a 8.40 percent combined state and local sales tax rate. more
    Who is exempt from property tax in Arizona?
    A. The property of widows, widowers and persons with disabilities who are residents of this state is exempt from taxation to the extent allowed by article IX, sections 2, 2.1, 2.2 and 2.3, Constitution of Arizona, and subject to the conditions and limitations prescribed by this section. B. more
    Is there income tax in Arizona?
    The state of Arizona requires you to pay taxes if you're a resident or nonresident that receives income from an Arizona source. The state income tax rates range from 2.59% to 4.50%, and the sales tax rate is 5.6%, and an average local sales tax rate of 2.8%. more
    Is Arizona a tax friendly state?
    The ranking, which placed Arizona ninth in the nation for tax friendliness for individuals and businesses, is determined by a state's tax burden as it relates to areas including income tax, property tax, sales tax and more. more

    Source: www.taxjar.com

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