Arizona Hoping New Form Increases 'Use Tax' Revenue From Out-Of-State Purchases

By Holliday Moore
Howard Fischer
Published: Tuesday, December 19, 2017 - 9:19am
Updated: Tuesday, December 19, 2017 - 5:04pm

Bought gifts and goods out of state? Or, gifts online? The state Department of Revenue hopes a new form will persuade more Arizonans to report those purchases and pay the state the appropriate amount of tax.

Arizonans pay 5.6 percent sales tax for most goods purchased at brick-and-mortar stores within the state.

But a "use tax" reserved for purchases made outside of Arizona has been left to more of an honor system.

Last year, the Department of Revenue collected $300 million in use taxes, mainly from businesses subject to audit.

The department believes the new form can not only increase compliance and revenue, but help protect in-state businesses. The idea behind the use tax is to dissuade residents from intentionally going outside of Arizona — to states with lower or no sales tax — to save money on purchases.

The tax isn't new: It's been on Arizona law books since 1955.

For those caught failing to pay their use taxes, the department can tack on a late filing penalty of 4.5 percent on the amount owed, plus interest of 0.5 percent for each month the taxes remain due.

EDITOR'S NOTE: This story was updated to reflect that the Arizona Department of Revenue is offering a new free-standing form for reporting use taxes, not adding a question about use taxes on standard income-tax return forms. Also, the interest penalty for those who fail to pay their use taxes has been corrected: That penalty is 0.5 percent per month.

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