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Estimator takes the hassle out of accounting for Arizona’s TPT

By SharpeSoft Staff |

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CATEGORIES: Tips & Tricks

If you are an Arizona company, or your firm routinely bids jobs in the Grand Canyon state, then you are subject to their unique way of levying sales taxes, known as the Transaction Privilege Tax (TPT).

Also referred to as a gross receipts tax (GRT), Arizona’s sales tax system differs from those of virtually every other state by imposing the tax on the seller rather than on the purchaser. Of course, vendors can pass the tax burden on to the consumer through higher prices, but ultimately the seller is the party that remains liable for the tax.

Nearly all businesses are required to pay the tax, which is levied against 16 separate divisions, including amusement, commercial lease, job printing, mining, owner builder sales, personal property rental, pipeline, prime contracting, private car line, publication, restaurant, retail, telecommunications, transient lodging, transporting, and utilities.

Taxes are levied against the business's total gross sales receipts. However, when a prime construction contractor bids a job, only 65% of the total bid price is taxed (with the assumption that material costs account for roughly 35% of the job bid, whose taxes are paid by the material vendors). The GRT-adjusted bid price is first taxed at the overall state rate of 5.6%, and then local municipalities take their cut, which can drive the total tax rate up to 11 percent or more.  It sounds simple, but of course it can be a lot more complicated in application.

To their credit, an Arizona state website has a PDF that outlines the procedure for calculating the TPT/GRT tax (check it out here: https://azdor.gov/sites/default/files/PROCEDURES_TPT_2000_tpp00-2.pdf), but unless you have the letters 'CPA' next to your name, good luck figuring out its eight pages of legalese, codicils and algebraic formulas. Since most of our clients do not double as accountants, SharpeSoft has made it easy to account for the tax in your job estimates by including a system setting that automatically computes the GRT tax for you.

If your company is subject to the GRT/TPT tax, just click the 'Enable support of Gross Receipts Tax in Summary' check box in Estimator’s Defaults > Settings window.  When that box is checked, fields for the GRT percentage and tax Rate will appear in the job Summary window (between the Insurance and the Total Estimate fields).  In the GRT field, enter the percentage of the job bid total that is to be taxed (65%). In the Rate field, enter the tax rate.  The system will automatically compute the tax owed and add the amount to the estimate totals in the summary.

To learn more about the GRT tax, check out the system Help. And of course, if you need assistance, feel free to call our technical support staff.