There are occasions when I’ll get a call from a new (or aspiring) business owner who calls or e-mails me saying, “I need to get an Arizona business license”. This statement is normally followed up by some variation of, “Can your firm help us with this?”
These questions are based largely on a number of (understandable, yet incorrect) assumptions:
First, that their business even requires a license to begin with; second, that such a license is given out by some central licensing authority here in Arizona, and, lastly, that there is a one-size-fits-all business license for every type of business out there. While one or more of these assumptions might be true in other 49 States, this is not the case here in Arizona.
Generally speaking, Arizona handles business licensing through a regulatory framework (or patchwork, depending on how you want to look at it) of tax, industry-specific, and local ordinance requirements. Let’s take a look at each of these categories:
Transaction Privilege Tax (TPT)
The TPT license may be the closest thing Arizona has to an actual statewide “business license”. Only the TPT license not so much a license as it is the “privilege” to collect and account to the State of Arizona for your business’ share of sales (and other) taxes.
If you intend to sell a good or service through your business, you are probably going have to apply for and have issued a TPT license for it. However, while most businesses are subject to requirement of a TPT license, quite a few are specifically excepted from the need to collect sales, use, vendor, etc. taxes under it.
As a new business owner, you should review whether or not your business falls under one of these TPT carve-outs. TPT licenses are issued by the Arizona Department of Revenue (ADOR). For more information about applying for a TPT license, as well as finding out whether or not your business’ activities are even subject to sales or use tax, check the TPT information page on the ADOR website, or consult with an Arizona business attorney.
NOTE: The State of Arizona isn’t the only governmental body to which your business may owe sales, use, etc. tax. You should always check with the specific tax office of the city and county where your business will be located for whether your business will be responsible for additional local taxes or levies.
Local and Municipal Licensing
While the State of Arizona itself does not issue a general state business license, some of our cities and towns do issue or require their own business licenses, depending on their own, unique criteria.
As with local taxes mentioned above, new or hopeful business owners should always contact the business or development office of the city or town in which they plan to open or operate the business to determine whether the new company’s activities are subject to any specific licensing requirements.
NOTE: Most municipalities have some type of local chamber of commerce, most of which would probably be glad to have you as a new, dues-paying member. There is often a new member or outreach coordinator who could be helpful in getting your questions answered–perhaps far more efficiently and accurately than officials of the city or town could.
Finally, your business may be of a type that is overseen and regulated by one or more Federal, State, county, or municipal-level governmental bodies.
If you plan to operate your business in a field requiring licensure (for example: insurance, chiropractor, esthetician, contractor, etc.) you are probably already aware of your need to meet the requirements of State licensing.
However, many other businesses which may not require a specific professional or trade license are also carefully regulated and will require special industry licensing or permitting, not to mention regular inspection.
A good rule of thumb is if your business could affect the health, safety, or even the morality of its customers or the public at large, then you probably will need to be licensed.
If you’re still unsure, another good starting place is Chapter 28 of the Arizona Administrative Code, which contains a list of occupations and fields which are subject to specific regulation, as well as the regulations themselves.
While our Arizona business law firm has the experience with (and is more than happy to charge clients by the hour to do) identifying the necessary business licenses and permits, the fact of the matter is that determining your particular business’ licensing and permitting requirements can be done with a bit of effort and patient research by the owner.
However, if you are unsure, or would just feel more comfortable having an Arizona business attorney perform this leg work for you while you focus on building your business, feel free to contact us. We’re here to help.
Ben Bhandhusavee is the Managing Attorney for BHANDLAW, PLLC, a Phoenix business and technology law firm working with start-up companies, creative intellectual property, Internet and digital media matters, and complex corporate M&A and technology transactions. Ben can be reached at (602) 222-5542 or by e-mail at firstname.lastname@example.org