Arizona Transaction Privilege Tax (TPT) Protest and Refund Claim

ARIZONA TRANSACTION PRIVILEGE TAX (TPT) PROTEST AND/OR REFUND CLAIM

TABLE OF CONTENTS

1. Header and Identification
2. Nature of the Filing
3. Background and Procedural History
4. Statement of Facts
5. The TPT Is a Vendor-Imposed Gross Receipts Tax
6. Issues Presented
7. Argument
8. Refund Claim Particulars (If Applicable)
9. Burden of Proof
10. Requested Relief
11. Hearing Request and Representation
12. Reservation of Appeal Rights
13. Verification
14. Certificate of Service
15. Arizona Practice Notes
16. Sources and References

1. HEADER AND IDENTIFICATION

ARIZONA DEPARTMENT OF REVENUE

Office of Administrative Appeals (Protest) or Refund Unit (Refund Claim)

1600 West Monroe Street

Phoenix, Arizona 85007

Date: [__/__/____]

Re: TPT PROTEST AND/OR REFUND CLAIM — [TAXPAYER NAME] — TPT LICENSE NO. [____]

2. NATURE OF THE FILING

This filing is submitted as (check all that apply):

☐ TPT Protest of the Notice of Proposed Assessment dated [__/__/____], filed within forty-five (45) days of receipt pursuant to A.R.S. § 42-1251(A).

☐ Refund Claim under A.R.S. § 42-1118 for TPT, interest, and penalties paid in excess of the amount actually due, filed within four (4) years of the date paid pursuant to A.R.S. § 42-1106.

☐ Combined Protest and Refund Claim addressing both contested deficiency and overpayment positions for the same tax periods.

Pursuant to A.R.S. § 42-1251(A), any unprotested portion of the proposed assessment has been remitted by [CHECK NO. / EFT CONFIRMATION] dated [__/__/____].

3. BACKGROUND AND PROCEDURAL HISTORY

3.1. Taxpayer is [describe — e.g., an Arizona-licensed retailer / a remote seller located in (state) / a marketplace facilitator] that conducts business activities classified under business class [CLASS CODE — e.g., 017 (Retail)] under A.R.S. § 42-5061 (or applicable section).

3.2. Taxpayer holds Arizona TPT License No. [____] issued [__/__/____] and is registered to remit TPT for the State of Arizona and the following municipalities: [LIST CITIES].

3.3. ADOR conducted an audit of Taxpayer for the periods [MM/YYYY] through [MM/YYYY], culminating in the Notice of Proposed Assessment dated [__/__/____] asserting additional TPT of $[AMOUNT], interest of $[AMOUNT], and penalties of $[AMOUNT].

3.4. The adjustments are summarized as follows:

4. STATEMENT OF FACTS

4.1. [Describe Taxpayer's business operations — locations, products/services, customer base, sales channels (in-state, out-of-state, online), and physical presence in Arizona.]

4.2. [Identify economic-nexus posture — gross sales to Arizona purchasers by year, marketplace-facilitator status, and any voluntary disclosure history.]

4.3. [Describe the transactions at issue, including how exemption certificates were obtained and retained, the customer profile, and pass-through mechanics.]

4.4. [Identify city/county TPT jurisdictions implicated, including the Model City Tax Code classification used and any reliance on prior published city guidance.]

4.5. [Describe Taxpayer's record-keeping and the systems used to compute and remit TPT.]

5. THE TPT IS A VENDOR-IMPOSED GROSS RECEIPTS TAX

The Arizona TPT is a tax on the privilege of doing business — measured by gross receipts — and is imposed on the seller (vendor), not the purchaser. Arizona Department of Revenue v. Mountain States Telephone & Telegraph Co., 113 Ariz. 467 (1976); A.R.S. § 42-5008. Although a vendor may, by contract, pass the economic burden of the tax through to the customer, the vendor remains the taxpayer of record and the party with statutory liability for collection and remittance.

This vendor-tax characterization carries several consequences material to this protest:

5.1. Standing. Only the vendor (Taxpayer) — not the customer — has standing to seek refund under A.R.S. § 42-1118. ADOR has no obligation to refund directly to consumers.

5.2. Liability for uncollected tax. Failure to collect TPT from a customer does not relieve the vendor; the vendor remains liable for the assessed amount.

5.3. Exemption certificates. Acceptance of a Form 5000-series exemption certificate in good faith protects the vendor from assessment under A.R.S. § 42-5022 even if the certificate is later determined to be invalid as to a particular transaction.

5.4. Pass-through documentation. A vendor that has separately stated TPT on customer invoices and refunded the tax to its customer (or holds it in trust) may pursue refund. A vendor that has not refunded to the customer must address the credit-pool and unjust-enrichment limitations of A.R.S. § 42-1118.01.

6. ISSUES PRESENTED

6.1. Whether [ISSUE 1 — e.g., Taxpayer's out-of-state sales fall below the $100,000 economic-nexus threshold of A.R.S. § 42-5044 and HB 2757 (2019), such that no Arizona TPT obligation arose for the audit periods].

6.2. Whether [ISSUE 2 — e.g., the resale exemption certificates obtained from purchasers are valid under A.R.S. § 42-5022 and ADOR Form 5000A].

6.3. Whether [ISSUE 3 — e.g., the contested transactions are properly classified under business class (X) rather than the higher-rate class (Y) asserted by ADOR].

6.4. Whether [ISSUE 4 — e.g., the city TPT assessment is barred by the limitations period or city-specific code provisions of the Model City Tax Code].

6.5. Whether penalties should be abated for reasonable cause under A.R.S. § 42-1125(P).

7. ARGUMENT

7.1. Economic Nexus and Wayfair Conformity (A.R.S. § 42-5044; HB 2757)

Following South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018), Arizona enacted House Bill 2757 (2019), creating an economic-nexus threshold for remote sellers and marketplace facilitators codified at A.R.S. § 42-5044. The current threshold is $100,000 in Arizona gross sales (effective 2021 forward); transitional thresholds were $200,000 (2019) and $150,000 (2020).

Taxpayer's Arizona gross receipts during each year of the audit period were [as set forth in Exhibit A]:

[State the conclusion — e.g., Taxpayer did not exceed the threshold until [DATE]; pre-threshold periods are non-taxable.]

7.2. Resale and Other Exemption Certificates (A.R.S. § 42-5022)

A vendor that obtains in good faith a properly executed exemption certificate (ADOR Form 5000, 5000A, 5000HC, or applicable Form 5000-series document) is relieved of TPT liability with respect to the certified transaction. [Apply to facts; identify the certificates produced at Bates [____].]

7.3. Business Classification (A.R.S. §§ 42-5061 et seq.)

Each TPT business classification has its own measure, deductions, and rate. [Identify the proper classification for the transactions at issue, citing TPT Procedure or TPT Ruling on point and the applicable subsection.]

7.4. City TPT and the Model City Tax Code

City TPT is administered concurrently by ADOR under A.R.S. § 42-6004 but the substantive tax base is set by each city's adoption of the Model City Tax Code ("MCTC"). [Identify the city, the MCTC section, and any city-specific exemptions or reduced rates applicable.] A city assessment cannot exceed the limitations and exemptions provided in the city's adopted MCTC.

7.5. Penalty Abatement (A.R.S. § 42-1125(P))

ADOR shall abate penalties for reasonable cause and absence of willful neglect. Taxpayer establishes reasonable cause through:

• Reliance in good faith on [outside CPA / SaaS tax-determination platform paired with professional review / written ADOR guidance];
• A substantial-authority position on each disputed adjustment;
• Full and timely cooperation throughout the audit;
• Prompt voluntary registration upon recognizing the economic-nexus threshold was met (where applicable).

8. REFUND CLAIM PARTICULARS (IF APPLICABLE)

Pursuant to A.R.S. § 42-1118, Taxpayer claims refund of TPT, interest, and penalties paid in excess of the amount actually due, as itemized below:

Total Refund Requested: $[AMOUNT], plus statutory interest under A.R.S. § 42-1123.

Limitations. Each line item above was paid within four (4) years preceding the date of this claim and is therefore timely under A.R.S. § 42-1106.

Treatment of Customer Pass-Through. Where TPT was separately stated to a customer and economically borne by the customer, Taxpayer [has refunded / will refund / agrees to hold in trust pending refund to] the customer to satisfy A.R.S. § 42-1118.01 and avoid unjust enrichment.

9. BURDEN OF PROOF

Pursuant to A.R.S. § 42-1255, ADOR bears the burden of proof by a preponderance of the evidence on factual issues relevant to ascertaining tax liability where the taxpayer (i) raises a legitimate challenge, (ii) cooperates fully, and (iii) maintains records as required by law. Taxpayer has met each condition through timely IDR responses, production of complete sales journals and exemption certificate libraries, and continuous good-faith engagement with the auditor and appeals officer.

10. REQUESTED RELIEF

WHEREFORE, Taxpayer respectfully requests that the Department:

• A. Grant a hearing on this Petition;
• B. Withdraw or reduce the proposed TPT assessment, interest, and penalties in full;
• C. Sustain Taxpayer's exemption claims and business-classification position;
• D. Hold that the economic-nexus threshold was not exceeded for periods [____];
• E. Abate all penalties under A.R.S. § 42-1125(P);
• F. Refund $[AMOUNT] in overpaid TPT, interest, and penalties, with statutory interest under A.R.S. § 42-1123;
• G. Issue an order or credit voucher in accordance with A.R.S. § 42-1118;
• H. Grant such other and further relief as is just and proper.

11. HEARING REQUEST AND REPRESENTATION

Taxpayer requests a hearing before ADOR's Office of Administrative Appeals.

Taxpayer designates the following authorized representative pursuant to A.R.S. § 42-2069 and ADOR Form 285 (filed concurrently):

12. RESERVATION OF APPEAL RIGHTS

Taxpayer expressly reserves the right to:

• File a notice of appeal to the Arizona State Board of Tax Appeals within thirty (30) days of the date the Department's hearing decision becomes final, pursuant to A.R.S. § 42-1253;
• File an action in the Arizona Tax Court (Maricopa County Superior Court Tax Department) under A.R.S. §§ 42-1254, 12-161, and 12-163, on de novo review;
• Bypass the administrative hearing under A.R.S. § 42-1251(D).

13. VERIFICATION

STATE OF ARIZONA

COUNTY OF [COUNTY]

I, [TAXPAYER REPRESENTATIVE NAME], being first duly sworn, depose and say that I am a duly authorized officer of Taxpayer; that I have read the foregoing Petition and Refund Claim and know the contents thereof; and that the same is true to my own knowledge except as to those matters stated upon information and belief, and as to those I believe them to be true.

[________________________________]

[NAME], [TITLE]

Sworn to and subscribed before me this [____] day of [_______________], 20[____].

[________________________________]

Notary Public

(My Commission Expires: [_______________])

14. CERTIFICATE OF SERVICE

I hereby certify that on this the [____] day of [_______________], 20[____], the foregoing TPT PROTEST AND REFUND CLAIM was served upon the Arizona Department of Revenue by:

☐ U.S. Certified Mail, Return Receipt Requested, addressed to:

Arizona Department of Revenue
Office of Administrative Appeals
1600 West Monroe Street, Mail Code 1610
Phoenix, AZ 85007

☐ Hand Delivery

☐ ADOR secure portal (AZTaxes.gov), Confirmation No. [____]

[________________________________]

[ATTORNEY / REPRESENTATIVE NAME]

15. ARIZONA PRACTICE NOTES

• TPT is not a sales tax. Arizona's TPT is a vendor privilege tax measured by gross receipts. Treating it as a consumer sales tax leads to errors on standing, exemption defenses, and pass-through mechanics. The vendor is the taxpayer; the vendor is liable even if it failed to collect from the customer.
• 45-day TPT protest window. The 90-day window applies only to individual income tax. TPT (and corporate income, withholding, and use tax) protests must be filed within 45 days of receipt of the Notice of Proposed Assessment.
• Concurrent state and city audits. Most Arizona cities have adopted the MCTC, and ADOR administers city TPT under A.R.S. § 42-6004. A single audit may produce both state and city assessments; protest each layer separately within the same petition where consistent with ADOR practice.
• Economic nexus thresholds. $100,000 in Arizona gross sales applies to remote sellers and marketplace facilitators from 2021 forward. Transitional thresholds were $200,000 (2019) and $150,000 (2020). HB 2757 took effect October 1, 2019.
• Marketplace facilitator collection. Marketplace facilitators are required to collect and remit TPT on behalf of their third-party sellers, which can shift liability away from the underlying seller for facilitated transactions. Confirm 1099-K and platform reports against ADOR audit data.
• Exemption certificate good-faith defense. A vendor that accepts a properly completed Form 5000-series certificate in good faith is generally protected. Maintain certificate libraries with renewal procedures.
• Refund standing. Only the vendor has refund standing under A.R.S. § 42-1118. Customer-driven refunds require the vendor to file and to refund the customer (or hold in trust) to avoid unjust-enrichment defenses under A.R.S. § 42-1118.01.
• City-specific deviations. Some cities have non-conforming MCTC options (Option Numbers). Confirm the adopting city ordinance for each disputed period; uniform state-level rules may not control.
• Use tax on out-of-state purchases. Use tax under A.R.S. § 42-5061 applies where TPT was not collected on tangible personal property used in Arizona. Cross-check vendor invoices against use-tax accruals.
• Audit sampling challenges. ADOR commonly uses statistical sampling and projection. Challenge improperly defined populations, blocked sampling without a clear plan, and projections that ignore documented exemption certificates.

16. SOURCES AND REFERENCES

• A.R.S. Title 42, Chapter 5 (Transaction Privilege and Affiliated Excise Taxes) — https://www.azleg.gov/arsDetail/?title=42
• A.R.S. § 42-5008 (Levy of TPT) — https://www.azleg.gov/ars/42/05008.htm
• A.R.S. § 42-5044 (Marketplace facilitators / remote sellers) — https://www.azleg.gov/ars/42/05044.htm
• A.R.S. § 42-1118 (Refunds, credits, offsets and abatements) — https://www.azleg.gov/ars/42/01118.htm
• A.R.S. § 42-1251 (Appeal to the department) — https://www.azleg.gov/ars/42/01251.htm
• A.R.S. § 42-1253 (Appeal to State Board of Tax Appeals) — https://www.azleg.gov/ars/42/01253.htm
• A.R.S. § 42-1255 (Burden of proof) — https://www.azleg.gov/ars/42/01255.htm
• A.R.S. § 42-6004 (City TPT administered by ADOR) — https://www.azleg.gov/ars/42/06004.htm
• Arizona House Bill 2757 (2019) — Wayfair conformity legislation
• South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018)
• ADOR Out-of-State Sellers — https://azdor.gov/business/transaction-privilege-tax/retail-sales-subject-tpt/out-of-state-sellers
• ADOR Economic Threshold — https://azdor.gov/business/transaction-privilege-tax/retail-sales-subject-tpt/out-state-sellers/economic-threshold
• ADOR FAQ — Remote Sellers and Marketplace Facilitators — https://azdor.gov/business/transaction-privilege-tax-tpt/retail-sales-subject-tpt/out-state-sellers/frequently-asked-questions
• ADOR TPT Audit Manual — https://azdor.gov/sites/default/files/2023-03/TPT_AUDIT_audit_manual.pdf
• ADOR TPT Ruling TPR 24-1 — https://azdor.gov/sites/default/files/document/RULINGS_TPT_TPR24-1.pdf
• Model City Tax Code — https://modelcitytaxcode.az.gov/
• ADOR Form 285 (POA) — https://azdor.gov/forms/poa-and-disclosure-forms

Disclaimer: This template is provided for informational purposes only and does not constitute legal advice. An attorney licensed in Arizona must review and customize this document before filing. Statutes, rates, classifications, and economic-nexus thresholds change; verify all citations and thresholds with current Arizona law and ADOR guidance.