In Arizona, service-based businesses may be running into more and more issues regarding sales taxes. Many service-based business owners believe that there should be no sales tax collected - but that is simply NOT true.
There are a number of services that ARE taxed. Here are a few examples:
Photography: Photographers are required to charge sales tax on everything they do. According to the AZ Department of Revenue “All of a photographer’s activities are taxable under the retail classification."
“Photography” means the operation of taking, developing, processing, or printing pictures, prints, or images on or from film, video, or other similar media. Gross receipts derived from the sales of photography by a photographer are taxable under the retail classification.”
Fitness businesses: In some locations in the Phoenix area, fitness businesses including health clubs, gyms, yoga studios and fitness centers are considered to be taxable, as far as sales tax is concerned. Each city has different rules. One city can be tax free while others charge. It's important to know the rules for your specific locations.
Spa Services: As a CPA in tax season, I spend at least an hour a month with a massage therapist. The good news is that the time you spend with your therapist is sales tax free. What I have found though it that most massage therapist have products they offer to relax muscles and help you feel better. Those are taxable as retail sales.
Sales taxes can be a tough nut to crack for service-based business. If you have a service-based business - and need help navigating the intricacies of sales taxes - let us know. Please view the GMLCPA FIRM PROFILE for contact options.
Other recent “Arizona (AZ)” posts by Gabrielle Luoma, CPA, CGMA:
- Arizona Business: Sales Tax Nexus Considerations
- Arizona MAAR Contractors: Simplified Sales Tax Facts
- Should Arizona Service-Based Businesses - Charge Sales Tax?