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Frequently Asked Questions - Licensing

We’ve compiled some of the most frequently asked questions (FAQs) that City staff receives from customers about tax and licensing agreements when doing business in Chandler.

Tax and License

What is a TPT license?
A TPT License is a Transaction Privilege Tax License commonly referred to as a sales tax, resale, wholesale, vendor or tax license

Do I need a license? Who must have a license?
All businesses operating in Chandler conducting taxable activity or that have use tax obligations must obtain a Transaction Privilege Tax License through the State of Arizona Department of Revenue.

Any business that meets the Chandler definition of a “Specialty license” i.e. Bingo, Massage, Mobile Food Unit, Off-Track Wagering/Amusements, Transient Merchant, Peddlers, Canvassers and Solicitors, Auctioneers, Junk Dealer, Pawnbrokers and Secondhand Dealers, Sexually Oriented Business, Escort and Liquor will need a license.  License applications are available from the Tax and License office by calling 480-782-2280, coming into the customer service office at 175 S. Arizona Ave., Suite A, or by downloading the application online. 
  
Transaction Privilege Tax is a tax on the privilege of doing business in the City. It is imposed on the business engaging in the taxable activity rather than on the customer. Some activities that are considered services are taxable, please contact us for specifics related to your line of business. The tax applies to the gross receipts of the business less specifically allowed exemptions and deductions.  Privilege (sales) tax revenues are used to finance the cost of various City services, such as police, fire, parks and recreation, streets, etc.
  
How/where do I get a license?
License applications are available from the State of Arizona Department of Revenue, visiting the ADOR customer service office at 1600 West Monroe Phoenix, AZ  85007, or go online to go to AzTaxes.gov. The license application should be submitted with the appropriate annual license fee, currently $50 for most businesses, but $2 for each residential rental location. For businesses in a commercial location an Application for Certificate of Occupancy – Tenant Occupancy must also be completed and submitted. If the business is a home-based business, the Application for Zoning Clearance, Home Business is required.

Do I need to renew my license every year?
Transaction Privilege Tax Licenses expire on December 31 of each year. You will be sent a renewal notice from ADOR to be completed and returned with the license renewal fee during the last portion of the calendar year.

What if my address changes?
You must notify ADOR in writing or online if you have location or mailing address changes.

  • If your business is relocating a new license may be required. Contact the ADOR for the licensing specifics for your case.
  • It is important to notify the ADOR office if your mailing address changes to ensure that you receive your tax returns and other documents sent by the ADOR.

I just purchased a business. Do I need a new Privilege Tax License?
Yes. Privilege Tax Licenses are non-transferable.  New owners of a business must apply for a new privilege tax license. Contact ADOR at 602-255-3381 or go to AzTaxes.gov.

I changed the type of my business (for example, from sole ownership to an LLC), do I need a new Privilege Tax License?
Yes. Privilege Tax Licenses are non-transferable.  New owners of a business must apply for a new privilege tax license. Contact ADOR at 602-255-3381 or go to AzTaxes.gov.

Examples of ownership changes include changing from sole ownership to a partnership, corporation or limited liability company (LLC); changing from a partnership to a corporation or LLC; addition or deletion of partners of a partnership; ownership of property changed to a trust; a corporation change requiring a new Federal ID number and any time there is a change in responsible parties involved in doing business together.

What if I close or sell my business?
You must notify ADOR in writing if your business has been closed or sold so that your license can be cancelled. The notice of cancellation must include the reason for cancellation and the effective date. Any time a business activity ceases, or ownership of the business changes, the final tax return is due within 15 days from the effective date of the change.

How do I notify the city of these changes?
Cancellations and address changes may be submitted on the back of the return envelope in the space provided or on the business letterhead and submitted by mail or fax.  Please be sure to include your business name and transaction privilege tax license number with all correspondence.

Tax Returns and Reporting

When will I receive my tax return?
Once you have applied for a Transaction Privilege Tax License, you will begin to receive tax returns at the reporting interval that has been assigned; either monthly, quarterly or annually. Tax returns are due by the 20th of the month following the end of the reporting period.

What is the tax rate?
The City of Chandler imposes a one and one half percent (1.5%) transaction privilege tax except on the following business activities: 

Class

Activity

Rate

Utilities

2.75%

5

Telecommunications

2.75%

11

Restaurant/Bar

1.8%

25

Hotel/Motel

4.4%

40

Jet Fuel

0.023

The legal responsibility to pay the tax is that of the business.  However, the business is permitted to pass the tax through to and collect the tax from its customers.  Any tax so collected must be remitted to the City.

When are tax returns mailed out to businesses?
The City makes every effort to print and mail tax returns during the last full week of the month.  Please contact our office if you have not received your tax return by the 10th of the month in which it is due.  It is the taxpayer’s responsibility to ensure taxes are reported and paid on time, even if a tax return form was not received from the Tax and License office.

Do I have to file a tax return if I had no taxable activity?
Tax returns must be filed for all reporting periods even if there was no taxable activity.  A tax return with no taxable activity may be filed by fax at 480-782-2343.

Does your office accept postmarks as the “received” date?
No.  Postmark dates are not acceptable.

What if I am late in filing my tax return with the City?
If you forget or fail to file a tax return, a reminder, in the form of a Non-filing Notice, will be sent around the 15th of the month.
 
Are there any penalties for filing a tax return late?
Penalties are assessed for filing tax returns late. The penalties increase when the delinquency extends for additional months. Also there is interest and a late payment penalty for late payment of the tax even though the return may have been filed on time. Penalties and interest are computed as a percentage of the tax due for the period covered by the return.
 
If a tax return is not filed on time, a 5% late filing penalty, for every month delinquent is assessed. Tax due and not paid timely is assessed a 10% late payment penalty.  These two penalties combined are limited to 25%. Interest is computed at the rate in effect for the Arizona Department of Revenue.

Can penalties be waived?
Penalties for late filing or late payment may be waived under certain circumstances. Interest charges, by statute, may not be waived. Requests for waiver of penalties must be submitted in writing together with any supporting facts and documentation.

How do I correct a mistake or make a change to a tax return already filed?
An amended return will need to be filed. To amend a previously filed tax return, make a photocopy of the tax return as filed. Mark the top of the copy in red ink “Amended Return.” Cross out the incorrect information and write in the corrected information.  Please resign and re-date the form. Save a copy of the amended return for your files. Send a letter with your corrected copy explaining the reason for changes.

If the amendment results in an overpayment, you will be sent a credit statement. The overpayment can be used as a credit against tax due on future returns unless you request a refund.  Refunds are discouraged if the credits can be applied to future taxes and fees within a year.

I didn’t make a profit in my business. Do I still have to report and pay tax?
The City’s privilege tax is computed on your gross receipts. “Making a profit” and “expenses” are applicable to income tax, but not Transaction Privilege Tax. Expenses are a cost of doing business and are not deductible in most cases. The tax is imposed on gross receipts less specifically allowed deductions and exemptions.

If I buy a business, am I liable for unpaid privilege taxes of the previous business owner?
Yes. Before purchasing any business, you should require the seller to provide a “Letter of Good Standing” from the taxing jurisdiction(s). This document states there is no tax amount outstanding as of the date of issuance by the taxing jurisdiction.

What if I refuse to file and pay the transaction privilege taxes?
It is unlawful (a crime) for any person knowingly or willingly to refuse to make a return or fail to remit the full amount of any tax or penalty and interest. Chandler Tax Code Section 62-580: Criminal Penalties.

What if I didn't collect the transaction privilege tax from my customers?
It is the responsibility of the business to remit transaction privilege tax. Whether you collect it from your customers or not, the tax liability for all taxable business conducted in City of Chandler must be remitted.

Where do City Transaction Privilege (Sales) and Use Taxes go?
Privilege (sales) taxes go to the General Fund and are used to support general operations and provide services to citizens. For more information, click here.

Deductions and Exemptions from Gross Receipts

I have a customer who has a 501(c)(3) designation (non-profit status). Are they exempt from tax?
Sales to most non-profit organizations are not exempt from tax.  There is an exemption for sales to certain qualifying health care organizations. These organizations should be able to supply a copy of a letter from the Arizona Department of Revenue in support of their exemption.

Are wholesale sales exempt from tax?
A deduction is allowed for “sales for resale.” These are sales to another licensed merchant who is purchasing goods to be sold to their customers. To claim this deduction a signed exemption certificate should be obtained listing the purchaser’s city and state sales tax numbers, the business name, the nature of the business, and a statement that the goods are being purchased for resale in the course of business. This certificate should be reasonable and support the deduction.

I own the building in which my company, an LLC, conducts business.  Is the rent I receive taxable?  What if I don’t receive rent payments, but the company makes the loan payments on the building?
The gross receipts from the rental of real property are taxable.  For the City, the relationship of the parties has no bearing on the taxability of the rental income if the landlord and the tenant in actual possession are distinct entities. If an individual has sole ownership of real property that is occupied by their company, an LLC, the rent received is taxable.

Payments made by the lessee (renter) to, or on behalf of, the lessor (landlord) for mortgage payments, property taxes, repairs or improvements are considered to be constructive rental income and part of the taxable gross income.

Two Most Common Errors Found on Tax Returns

  • Failure to complete Schedule A on the back of the return.  Schedule A is necessary to itemize the deductions and exemptions being claimed in Column 2 on the front of the form.  If Schedule A is not completed, all deductions are disallowed.
     
  • Listing “exempt sales” or “nontaxable” under the “ Other” deduction Code 75. The Code 75 deduction is provided for less common deductions and exemptions that are not separately listed on the tax form. Use of the “75” deduction code requires a detailed description of the exemption being claimed, such as “doc fees” for car dealers.