Arizona Business License Summary
When starting a small business in the state of Arizona, many business owners will need to register for one or more service-related taxes.
1) Arizona Tax Registration
Withholding income tax, and certain other taxes, are required by most business with employees. Some taxes only apply to specific services. For example, bingo operators within Arizona will need to address the bingo tax. On the other hand, businesses that wholesale tobacco products, such as cigarettes and cigars, must pay the tobacco luxury tax. Liquor distributors within the state, including microbrewers and domestic farm wineries, will need to pay liquor luxury tax.
For a more extensive list of possible taxes, visit the State of Arizona Department of Revenue’s website . You can also take a look at the site’s newsletter archives for updates and changes in local tax laws.
2) Business Licenses
Small business owners in Arizona should also check to verify which business licenses or permits relate to their specific services. While some business endeavors may not warrant a license, others may require multiple licenses. In Arizona, most licenses and permits fall into one of the following categories:
- State and City Transaction Privilege Tax Licenses
- Regulatory or Professional and Special Licensing and Permits
- Local Business/Occupational Licenses and Permits
Business owners may consult the Licensing and Taxes page by the State of Arizona Department of Revenue for more information. In addition to general information, the page also provides a link to a business guide that may help new business owners handle taxes and licensing policies within the state.
3) Local Permits
The local government in your area, such as that of your city or county, may require specific permits and licenses. Each municipality may have its own unique regulations. Here are some of the most common licenses and permits you may need.
- Alarm Permit
- Building Permit
- Business License and/or Tax Permit
- Health Permit
- Occupational Permit
- Signage Permit
- Zoning Permit
4) Formalizing Your Business Entity
Arizona businesses that assume of the form of corporations, non-profit organizations, partnerships or limited liability companies must register with the Arizona Secretary of State.
Application forms, general information, frequently asked questions and relevant publications can be found on the Arizona Secretary of State website and the Arizona Corporation Commission.
If you have decided to form a sole proprietorship business, be aware that you do not need to register with the state. However, the business will assume the personal identity of the owner. It is also important to note that Arizona recognizes businesses form by a husband and wife as a sole proprietorship.
5) Doing Business As
Sole proprietorships come with significant risks. One of which is that an individual’s personal assets may be at risk in the event of a business lawsuit. If you wish to avoid these risks, you can create a limited liability company or a corporation. You might also want to register for a trade name, which allows you to create a fictitious name for your business that is independent from your personal identity. Visit the Tradenames and Trademarks Questions and Answers page by the Arizona Department of State for more information.
A) Withholding Income Taxes
The Internal Service says that employers should hold onto employment tax records for at least four years after completing the filing process of the year’s 4th quarter. The retained records should include the following items:
- Personal information of employees, such as contact information and social security numbers
- The employer’s identification number
- Annuity, wage and pension payment information for employees
- Copies of employees’ tax withholding allowance certificates
The IRS website offers a more extensive list of items and strategies that you should consider when you aim to keep business records. The tips offered by the IRS will help keep your business running smoothly and help you address future concerns, such as preparing tax returns.
B) W-4 and W-2 Forms
Employees in Arizona will need to give signed copies of Form W-4 to their employer. Form W-4 serves as a withholding exemption certificate, which the employer needs to submit to the IRS.
Along with Form W-4, the employer is responsible for Form W-2, a document that has information relating to the paid wages and taxes of each employee.
The Social Security Administration will require copies of Form W-2 by the end of February. Each employee should receive a copy of the form by the following January.
The following sources provide information and forms for the W-2 and W-4 documents: The Social Security Administration’s Employer W-2 Filing Instructions and Information page. Also check the Internal Revenue Service's Employer Tax Guide
C) Employee Eligibility Verification (Form I-9)
Newly acquired employees in Arizona should be instructed to fill out Form I-9, which should be returned within three days of the start of the employment. The employer should keep these forms on file as they provide proof of eligibility to work in the United States. Form I-9 can be found on the official site of the United States Citizenship and Immigration Services .
D) New Hire Reporting
New or returning employees must be reported by the employer within 20 days of beginning employment. The report, which should contain personal information such as the employee’s name, address and social security number, should be directed to the Arizona New Hire Reporting Center. Visit the Reporting Center’s official website for electronic filing of information. The site also offers employer resources to aid with the daunting task of starting a new business and managing employees.
E) Insurance Requirements
In the event that your Arizona-based business requires employees, you will become responsible for additional taxes, including unemployment tax and workers’ compensation tax.
Workers’ compensation tax provides aid to employees who were injured while at work, or individuals who suffer from a work-related illness. More information is available at the Industrial Commission of Arizona’s website.
Unemployment insurance tax aids unemployed individuals who are looking for jobs. Visit the Arizona Department of Economic Security for additional information. The site features an employer handbook that discusses unemployment insurance tax requirements.
Disclaimer: While this article accurately describes applicable law on the subject covered at the time of its writing, the law continues to develop over time. Accordingly, caution should be taken before relying upon this article, and you should verify that the law described herein has not changed. This article should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult a lawyer concerning your own situation and legal questions.
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