Have a Tax Question? Ask a Tax Expert
Hello! I am a CPA here to assist you with your tax questions. My goal is to provide you with excellent service today.
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I hate to be the bearer of bad news, but you should be charging a Transaction Privilege Tax, which is also referred to as "sales tax" on the tours
The tax is not a true sales tax, but a tax that is imposed for the privilege of having a transaction in the state.
There are several exemptions to who is liable for this tax, but based on the information that I have in your question you would not qualify for one of the exemptions.
A flyer detailing this tax can be found, HERE
It is also possible that Arizona will want back taxes for tours that you did not pay the privilege tax on.
I can't guarantee that they will ask for back income, but it is a possibility.
I would start to charge this tax on your tours now, so that your customers are carrying the cost of the tax.
If it's been a significant amount of time that you have been in business and not remitting taxes, I would strongly suggest seeking the assistance of an Arizona CPA to assist you in filing your returns and navigating any back tax issue.
I wish I had better news for you - please don't shoot the messenger!
I kinda figured your answer was going to be what you said. I have no problem starting to charge a sales tax to my customers, but the idea of seven years (that's how long I've had the business...The business is actually over 12 years old. The previous owners never charged a tax) of back taxes puts me in an impossible situation. Should I consult an attorney to see if I can forestall or entirely avoid back taxes and penalties?
You don't need an attorney, you could get a CPA (may be cheaper). But, you will need a professional to tell you how to handle this delicate situation.
It's possible that perhaps you could get some of your penalties abated.
I'm truly sorry you're in this situation. Please let me know if you have further questions about this matter. If not, please rate as "excellent" so that I may receive credit for assisting you today
Hi again Megan,
Your prompt and heartfelt answer were much appreciated. Thank you for tyour professionalism and expert help. You certainly will get an excellent rating.
You're welcome. Be sure you let me know how I can help you further.
Thanks, Ed. Best of luck!