TRANSACTION PRIVILEGE TAX AND USE TAX Contracting and Purchasing Services

CLICK TO EDIT MASTER TITLE STYLE D EFINITION : TRANSACTION PRIVILEGE TAX Commonly referred to as Sales Tax Tax on retail sale of tangible personal property and certain services Tangible- can be touched, felt, tasted

GOODS Goods –Generally taxable unless specifically exempt 3

SERVICES Services –Generally exempt unless taxable 4

D EFINITION - USE TAX Tax on use/storage/consumption of tangible personal property 5.6% The purchase is otherwise taxable –Example: Out of state purchase 5

N ON - TAXABLE TRANSACTIONS Professional/personal services Warranty services/service contracts Conference registration fees Professional membership dues Textbooks/course material Printed and other media materials (available to the public) by NAU library Unprepared food for human consumption Medically prescribed drugs, equipment or devices Purchase for resale Shipping services/freight charges –Not handling services 6

N ON - TAXABLE TRANSACTIONS Repair/maintenance and installation services –If separately disclosed on invoice Others as set forth in statues such as ARS or ARS – 7

M ACHINE / EQUIPMENT USED FOR RESEARCH ACTIVITY Purchase of machine/equipment used ONLY for research-not taxable Research does not include –Social science –Psychology –Computer software development –Non-technological activities or technical services Machine/Equipment does not include –Expendable materials –Office equipment, furniture and supplies 8

C HEMICALS USED FOR RESEARCH ACTIVITY Chemicals used directly in research-not taxable Cannot be used or consumed in activities such as packaging, storage or transportation Researcher who orders the item must determine whether it is “chemical” 9

Hardware-generally taxable Standard/Pre-written software-taxable (tangible product) Customized software-not taxable (purchase of services). Services such as analysis, design, repair, support engineering…not taxable Maintenance and warranty agreement for hardware and software. Generally not taxable if it is sold as a separate item and the price is stated separately. Software agreement for updates, modification, or revisions to a standard software. Taxable. 10 COMPUTER HARDWARE, SOFTWARE AND SERVICES

C YBERSPACE Internet access services –Not taxable Web hosting services –Grey area –Generally not taxable 11

O THER COMMON ISSUES Purchase from out of state vendor –Use tax is payable if the purchase was otherwise taxable Renting of personal property like furniture/cars –Taxable Subscription to an informational database –Not taxable 12

PUBLICATION Publication (newspapers, magazines, journals) published in AZ –The publisher is liable for sales tax even if the customer subscribe is out-of-state –Except tourist magazines 13

U SE TAX AND PEOPLESOFT You must calculate the Use Tax amount and manually enter in Pulled monthly by dollar amount via Comptrollers Office Working on getting process corrected 14

U SE TAX AND PEOPLESOFT 15 Check the transaction to apply Use Tax on and select “Purchase Details”

U SE TAX AND PEOPLESOFT Select Sales/Use Tax 16

U SE TAX AND PEOPLESOFT 17 Manually calculate the Use Tax amount (5.6%) and enter in the Use Tax field. Select OK

U SE TAX AND PEOPLESOFT 18 Select OK and Save

U SE TAX AND PEOPLESOFT To view: Select the distribution icon on the appropriate transaction. 19 Choose the second tab Details/Tax and verify the amount under Use Tax

RECAP Sale of tangible property is taxable unless exempt Sale of services is not taxable unless specifically taxable If taxable goods are purchased from an out of state vendor, then self assess use tax 20

U SE TAX DECISION TREE 21

R ESOURCES Comptroller Policy 120: ARS or ARS