Arizona Transaction Privilege Tax Exemption For Forklifts Used By Manufacturers

The Arizona Transaction Privilege Tax exemption for forklifts used by manufacturers has been clarified and expanded as a result of a recent ruling received by the sales tax consultants at Agile Consulting Group. Transaction Privilege Tax or TPT is to Arizona what Sales and Use Tax is to most other U.S. states. Transaction Privilege Tax is levied on sales of most goods and some services in the state of Arizona. However, there is an exemption in place for the manufacturing industry.

In a prior post, Agile has discussed the Arizona sales tax exemption for manufacturing. The exemption is outlined in Ariz. Rev. Stat. Ann. §42-5061(B)(1) and includes a number of different categories of purchases commonly made by manufacturers. One area where the Statutes and the Arizona Department of Revenue’s guidance has been lacking relates to forklifts, which are arguably one the most universally used types of machinery and equipment across all types of manufacturing operations regardless of the product being produced. In fact, no prior rulings or guidance have been provided regarding how the Arizona Department of Revenue suggests that the manufacturing exemption applies to forklift purchases, leases, repairs, as well as the fuel used to power these units.

Agile requested clarification of the Arizona Transaction Privilege Tax exemption for forklifts used by manufacturers in a ruling submitted to the Arizona Department of Revenue in June 2023. Additionally, our sales tax consultants argued for favorable tax treatment of these forklifts across twelve different scenarios for forklifts in use at a plant for one of our longstanding Arizona manufacturing clients. In the response Agile received from the Arizona Department of Revenue’s Taxpayer Services Section representative, we received encouraging news for all Arizona manufacturers that use forklifts within their manufacturing process.

The key takeaways from the ruling Agile received about the Arizona Transaction Privilege Tax exemption for forklifts used by manufacturers are:

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Monika Miles Arizona Tax Climate

This southwestern state is best known for the Grand Canyon, the mile-deep chasm carved by the Colorado River. Flagstaff, a ponderosa pine-covered mountain town, is a major gateway to the Grand Canyon. Other natural sites include Saguaro National Park, which protects the cactus-filled Sonoran Desert Landscape. Tucson is home to the University of Arizona and to the Arizona-Sonora Desert Museum.

Southern Arizona is known for its desert climate, with very hot summers and mild winters. Northern Arizona features forests of pine, Douglas fir, and Spruce trees, the Colorado Plateau, some mountain ranges (e.g., the San Francisco Mountains), as well as large deep canyons, with much more moderate summer temperatures and significant winter snowfalls. There are ski resorts in the areas of Flagstaff, Alpine, and Tucson. In addition to the Grand Canyon National Park, there are several national forests, national parks, and national monuments in the state.

Business Climate

Early in its history, Arizona’s economy relied largely on the “five C’s:” copper, cotton, cattle, citrus, and climate (tourism). Copper is still extensively mined from many expansive open-pit and underground mines, accounting for two-thirds of the nation’s output.

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