Retail Sales

You owe retail transaction privilege tax if:
You are in the business of selling items to someone who plans to use the items and not rent or resell them. The seller owes the transaction privilege tax to the City of Mesa whether or not the seller added transaction privilege tax to the price of the item sold.

Membership fees of retailers
Membership, admission, or other fees charged by limited access retailers are considered part of taxable retail sales.

Tax rate on retail sales
The City tax rate is 1.75% of the taxable income.  (Note: The Mesa City Tax rate increased to 1.75% effective 07/01/2006)

Collection of tax
You may choose to charge the tax separately on each sale, or include transaction privilege tax in your price. If you over charge any tax to your customers, you must remit the excess tax to the city.
If you include tax in your price, you can use factoring to "back into" the tax included in your gross sales.

Trade-ins
If you take a trade-in for partial payment on an item, you owe transaction privilege tax on the difference between the original selling price and the trade-in amount. Trade-in allowances are not allowed for new manufactured buildings.

Sales to nonprofit organizations
A transaction where the customer is a nonprofit organization is subject to the transaction privilege tax even though the property so acquired may be resold or leased by the nonprofit organization to others. However, sales to a qualifying hospital or health care organization are exempt.

Sales to government jurisdictions
Other than the above sales exemptions to the federal government, all sales to the state, cities, counties, school districts and other political subdivisions are taxable including sales to the City of Mesa.


Retail Exemptions
Income from the following sources is exempt from the tax on retail sales:

Sales to a person regularly engaged in the business of selling or renting such property
When you sell an item to someone who plans to rent or resell it, you do not owe tax on that sale. But you must have clear and complete records of these sales or you will be taxed as if all your sales are taxable. Your records must separately show figures for retail sales and sales for resale. For each sale for resale, you must record the property sold, the buyer's name and address, the buyer's transaction privilege tax license number and a signed statement by the buyer saying that the goods will be resold in the ordinary course of business.

Out of state sales
When an item is ordered by a non-resident and is delivered to the buyer at a location outside the state, and the item is purchased for use outside the state, you do not owe tax on that sale. You must keep adequate records to prove that the transaction was an out of state sale.

Charges for delivery and installation
When you charge for delivery or installation labor on items not becoming permanently attached to realty, you don't have to pay tax on the charges if you clearly show them separately on customer invoices and in your records.

Services
If you operate a service business, income from that business is generally exempt from retail transaction privilege tax. However, this is true only if sales of tangible items are an incidental part of your business. If you regularly make sales of tangible items to your customers and/or maintain an inventory of tangible items available for sale to customers, you are engaged in retail business and are liable for tax on those sales. Examples of service businesses include landscape maintenance, pool maintenance, doctors, attorneys and accountants.

Bad Debts
A deduction is allowed for bad debts previously reported as taxable sales.

Cash & trade discounts
Cash discounts allowed for timely payment by customers are not included in gross income. When coupons issued by a vendor are accepted as a discount against a transaction, the discount may be excluded from gross income. However, discount amounts for coupons issued by any person other than the vendor, such as a manufacturer, may not be excluded from gross income.

Refunds on returned merchandise
A deduction is allowed for refunds on amounts previously reported as taxable sales.

Sales of warranty, maintenance, and service contracts, when separately charged and separately maintained in your books and records

Sales of prosthetics
These include medically prescribed drugs, eyeglasses, contact lenses, hearing aids, hospital beds, wheelchairs, corrective shoes, crutches, braces for neck, back, arm or leg, and artificial limbs or teeth.

Sales of income-producing capital equipment
When you sell an item to someone who will use the equipment primarily for the purpose of directly producing income in the normal course of business, you do not owe tax on the sale. In order for the sale to qualify as exempt from tax, the purchaser must be engaged in a business that directly uses the item to produce income and the item is to be directly used in the production of income. Manufacturing equipment and job printing equipment qualify as income-producing capital equipment.

Custom computer software
When a sale is made of custom computer software which is prepared exclusively for a customer, the charges are considered direct customer services and are exempt from transaction privilege tax. However, a sale which is not custom computer software is taxable as a retail sale.

Sales of mining and metallurgical supplies
However, the sale of sand, rock, and gravel extracted from the ground is considered a taxable retail sale and not mining or metallurgical activity.

Sales of motor vehicle fuel


Sales of construction materials to a contractor who holds a valid Transaction Privilege Tax License for engaging in the business of construction contracting where the materials sold are incorporated into the construction project
The vendor must secure a statement from the contractor stating the materials purchased will be incorporated into a construction project in fulfillment of a contract, and is not for personal use. The vendor must also have the contractor's Transaction Privilege Tax License Number.

Sales of items that become ingredients of a product sold in the regular course of business of job printing, manufacturing, or publication of newspapers, magazines or other periodicals
However, items which are not ingredients but are used up in a manufacturing, job printing, or publication process are subject to transaction privilege tax when sold.

Sales made directly to the federal government as follows:

  One hundred percent (100%) of the gross income derived from retail sales made by a manufacturer, modifier, assembler, or repairer.
  Fifty percent (50%) of the gross income derived from retail sales made by any other person.


Sales of stocks, bonds, options, or other similar materials

Sales of platinum, bullion, or monetized bullion, except minted or manufactured coins transferred or acquired primarily for their numismatic value

Food sales to eating establishments
Sales to hotels, bars, restaurants, dining cars, lunchrooms, boarding houses, commercial airlines or similar establishments, of articles consumed as food, drink, or condiment, whether simple, mixed, or compounded, where such articles are customarily prepared or served to patrons for consumption on or off the premises, are exempt from transaction privilege tax. However, the purchaser must be properly licensed and paying tax to the City on sales to customers. Also, sales of paper (and similar products, such as plastic or Styrofoam) cups, lids, plates, bags, napkins, straws, knives, forks, etc., to eating establishments are exempt from transaction privilege tax (effective 2/1/95).

Sales of items to a qualifying hospital or health care organization

Food for home consumption

Certain sales to persons engaged in the business of farming, ranching, or feeding livestock, poultry or ratites
If you make sales of seed, fertilizer, fungicides, seed treating chemicals, feed for livestock or poultry, including salt, vitamins, or other additives, and livestock, poultry, or ratites purchased for slaughter, you do not owe transaction privilege tax. However, you need to pay tax on sales of livestock to be used for production or use, and for sales of machinery, equipment and fuels used in the business of farming, ranching, or the feeding of livestock, poultry, or ratites.

Sales of groundwater measuring.ces

Sales of paintings, sculptures, or similar works of fine art sold by the original artist
However, sales of items such as jewelry, macrame, glasswork, pottery, woodwork, metalwork, furniture, and clothing, when such have a dual purpose, both aesthetic and utilitarian, are not exempt, whether sold by the artist or by another.

Sales of aircraft acquired for use outside the state

Sales of goods consisting of manufactured items destroyed by being subjected to destructive stress, strain, or similar testing, for the purpose of developing engineering information or for the purpose of quality control

Sales of printed and electronic materials to publicly funded libraries

Cleanrooms used for research and manufacturing of semiconductor products

Personal hygiene items sold to hotels and motels for use by guests

Sales to Native Americans
Sales to Native Americans by vendors located within the City are not taxable if all of the following exist:

  • solicitation and placement of the order occurs on the reservation
  • delivery is made to the reservation
  • payment originates from the reservation


 

 

Office Locations:
Licensing Office
55 N. Center St.
Mesa, AZ  85201
Phone: 480-644-2316
FAX: 480-644-3999

Tax Audit & Collections
20 E. Main St, Suite 450
Mesa, AZ 85201
Phone: 480-644-3816
FAX: 480-644-2687


Office Hours:

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7:00 a.m. to 6:00 p.m.
Closed Fridays

Mailing Address:
Tax & Licensing Office
P.O. Box 1466
Mesa, Arizona 85211-1466

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