Section 13.1 How to Obtain an Arizona State Tax ID Number, Use Tax & Employer Withholding Number
If your company has a federal employer identification number (EIN), use that number on Arizona state income tax forms to identify the company. If you company needs any of the following items, it must prepare and file an Arizona Joint Tax Application with the Arizona Department of Revenue:
- Arizona transaction privilege tax license,
- Arizona tax identification number;
- Arizona use tax registration certificate;
- Arizona unemployment insurance withholding identification number; and
- Arizona employer income tax withholding number.
The application is called “joint” because it is used by both the Departments of Revenue and Economic Security and allows you to apply for any of the listed licenses and registrations on a single application. To apply for other types of licenses that are issued by other Arizona state agencies such as the Registrar of Contractors and the Department of Real Estate, contact those agencies directly. Many cities require businesses to obtain annual permits to conduct business within the city limits.
Complete and submit the Arizona Joint Tax Application.
Section 13.2 Withholding of State Income Tax from Wages
Withholding of Arizona income tax is required for businesses or individuals who hire employees. There are a few exceptions to this requirement. Businesses considering the use of “contract” workers are cautioned to consult with their tax professional for advice. Use the Arizona Joint Tax Application (Form JT-1) to register your Employer Identification Number for withholding and to begin your unemployment insurance registration (there are no registration fees).
Withholding percentages are based on gross taxable wages. “Gross taxable wages” is the amount that meets the federal definition of “wages” contained in Internal Revenue Code § 3401. Generally, gross taxable wages are reported in box 1 of the employee’s federal Form W-2 at the end of the calendar year. The minimum withholding percentage is 1.3% of gross taxable wages for employees whose annual compensation is less than $15,000. The minimum withholding percentage is 1.8% of gross taxable wages for employees whose annual compensation is $15,000 or more. Additional withholding percentages of 2.7%, 3.6%, 4.2% and 5.1% are available to any employee. In addition to electing a withholding percentage, employees may now also designate an additional amount to be withheld from each paycheck. Employees elect the applicable percentage of Arizona withholding on Form A-4, Employees Withholding Allowance Certificate.
Due dates for the quarterly returns (Form A1-QRT) are April 30, July 31, October 31, and January 31 for the preceding calendar quarter. Payments are due at the same time as the quarterly return if the average amount of Arizona income taxes withheld in the preceding four calendar quarters does not exceed $1,500. If the average amount of Arizona income taxes withheld in the preceding four calendar quarters exceeds $1,500, the withholding payments are due at the same time as the employer’s federal withholding deposits. The employer must determine its Arizona withholding payment schedule for each calendar quarter by calculating the average amount of Arizona income taxes withheld in the four preceding calendar quarters. Employers are granted an automatic 10-day extension to file the quarterly reconciliation if their payments for the quarter were made timely.
Annual withholding may be allowed if the amount collected and payable by the employer in each of the preceding calendar quarters did not exceed an average of $200.
Electronic Funds Transfer (EFT) is the required method of payment for withholding if the employer’s average quarterly withholding liability for the preceding calendar year was $20,000 or more. Requirements for completion of the department’s authorization agreement and for voluntary participation in the EFT program are the same as for transaction privilege tax.
The annual reconciliation (Form A-1R) is due February 28 of the year following the calendar year for which Arizona withholding payments were made. The completed form is submitted with the state copy of Forms W-2.
Penalties for late filing and late payment are the same as for transaction privilege tax listed in this publication.
Section 13.3 Arizona Use Tax
Use Tax is the companion tax to the transaction privilege tax. Businesses (or individuals) making out-of-state purchases for their own use – not for resale – on which no tax is paid, are required to pay the use tax. Therefore, businesses planning to use, store, or consume goods brought into Arizona on a regular basis must register for use tax using the Arizona Joint Tax Application (Form JT-1). Out-of-state vendors conducting business in the state or making direct sales into Arizona are also required to be registered and to collect and report the tax. Payment and reporting requirements are the same as for transaction privilege tax. The Arizona State, County, and City Transaction Privilege and Other Tax Rate Tables identify the use tax rates for the state and cities.
Section 13.4 Arizona Unemployment Insurance
Arizona law requires companies that have employers in Arizona to obtain state unemployment insurance and register with the Arizona Department of Economic Security. Arizona employers obtain an Arizona unemployment insurance withholding identification number and register for unemployment insurance by filing an Arizona Joint Tax Application. For unemployment tax rates and other information, please contact the Arizona Department of Economic Security or see its website.