Forming your business entity in Delaware—specifically, a corporation—gives you a lot of flexibility, but you may still need to follow local laws depending on what state you operate in.
Specifically, if you do business in Arizona, you need to register with the state. We’ll walk through the process and simplify it. But first, how can you tell whether you’re legally doing business in Arizona?
When to register as doing business in Arizona
Delaware C corps—and all other corporations formed outside of Arizona—are referred to as “foreign” corporations by the State.
Arizona statutes do not specifically define what is considered doing business in the state. However, Arizona statutes provide that the following activities would not require you to register with the State:
- Defending or settling a lawsuit
- Having a bank account in the state
- Selling through independent contractors
When to register to collect sales tax in Arizona
Every state has rules about when a company is required to pay sales tax. These are called sales tax nexus rules.
You can think of the nexus as a special version of that state’s border; if you perform certain business activities within that border, you fall into the state’s sales tax nexus, and you’re required to register for and collect state sales tax.
Typically, these actions take the form of buying and selling goods and services.
In Arizona, the sales tax nexus rules only apply to sellers who sell physical goods or services to Arizona residents.
Until 2018, selling or buying non-physical goods—like subscriptions to streaming services, SaaS memberships, etc.—did not, generally speaking, qualify you for sales tax nexus. After an important court ruling in 2018, that changed. Now, if you buy or sell non-physical goods or services in a state, you may fall within its sales tax nexus.
Arizona sales tax nexus (physical goods and property)
If you have physical presence in Arizona, then you will likely need to collect and remit a transaction privilege tax. This tax is commonly referred to as a sales tax in most other states. The Arizona Department of Revenue would consider you to be physically present if you have warehouses, retail spaces, or employees and/or representatives of the business in the state.
You will need to pay sales tax as long as you have physical presence regardless of any minimum thresholds. You can learn more about physical presence for sales tax purposes through the State’s website.
Arizona sales tax nexus (non-physical good and property)
The new state sales tax laws applying to non-physical (ie. internet) sales allow you to qualify for sales tax nexus even without physical presence or goods. In Arizona, you need to cross a certain threshold to qualify.
You will need to collect and remit sales tax if you collect $100,000 or more in gross revenue from Arizona
If you would like to take a deep dive, you can check out the State’s website.
As usual, this isn’t legal advice—just a guide. If you’re not 100% clear on whether you fall within Arizona’s sales tax nexus, it’s best to confer with your legal counsel and/or an accountant that has expertise in Arizona’s legal code and tax regulations.
How to register to do business in Arizona
- Select a name under which to do business. This doesn’t have to be the name you registered when incorporating in Delaware, but it can be.
- Fill out an application. You’ll need to file an Application for Authority to Transact Business or Conduct Affairs in Arizona to the Arizona Corporation Commission along with a Delaware Certificate of Good Standing.
- Pay the fee. Now you pay the Arizona Corporation Commission a $175 filing fee.
- Submit your Application for Authority to Transact Business or Conduct Affairs in Arizona.
- Wait. Processing typically takes two to four weeks.
Once you’re approved to operate as a qualified foreign business in Arizona, you’ll need to comply with certain requirements.
Compliance has a qualified business in Arizona
To stay in compliance and continue legally doing business in Arizona, you need to meet two requirements: maintaining a statutory agent and filing your annual report. On top of that, you will also need to pay a corporate income tax.
Statutory agent in Arizona
Your statutory agent in Arizona is your point of contact with local authorities. This statutory agent is similar to what most other states call a registered agent. If you don’t have a physical address for your company in Arizona, it may be advantageous to find a statutory agent to receive state notices on your behalf.
Foreign corporations are required to have a registered office in Arizona. The office cannot be a P.O. box, rather it must be a physical address of your statutory agent or a licensed statutory agent service.
Your statutory agent will forward any important information, such as business mail, to you. There are a number of firms that contract out statutory agents. They typically cost $50 – $100 per year.
Annual reporting in Arizona
Every year, you must file a statement with the State, updating any changes to the company address or the composition of the Board and officers. You’ll include info like:
- The legal name of your business
- The name and address of your registered agent
- The names and addresses of board members, managers, and officers
The filing fee for the annual report is $45.
Paying your corporate income tax
Arizona has a corporate income tax. A corporate income tax is a tax imposed directly on the income of your corporation. For more information on filing and paying your corporate income taxes, please see the following guidance from Arizona Department of Revenue.
Registering for transaction privilege tax in Arizona
If you meet the requirements to collect transaction privilege tax in Arizona, you will need to apply for an Arizona transaction privilege tax license. You can apply for a transaction privilege tax license online.
Hiring and paying employees in Arizona
When you hire a new employee in Arizona, federal and state laws require that you report new hires within 20 days of a new employee’s hire date. You can report your new hires online.
Your payroll provider should be able to take care of paycheck withholdings, but it’s up to you to register as an employer with the State and set up an online employer account.
For a comprehensive guide of your responsibilities, Arizona provides the following information.
The easiest way to register your business in Arizona
To register your business in Arizona, you’ve got to keep track of a lot of moving parts. Failing to file the right forms, provide the right information, or stay on top of compliance laws can lead to serious headaches.
Capbase makes it easy. When you incorporate your Delaware corporation on Capbase, we will generate the required information needed to register to do business in Arizona and keep you up to date on any required filings.
The compliance calendar inside your Capbase account will notify you of upcoming fees, reporting, or other requirements, so you can keep your startup in good standing with Arizona state officials. Try Capbase now.