Businesses often require federal, state, county, or local licenses or permits to operate legally. Besides differences in the levels of government, business licenses and permits generally fall into three categories: general business licenses, tax or income-related licenses, and regulatory or professional licenses. Some, particularly income and tax-related permits, may be required of all businesses, while others vary by industry, occupation, and location.
While there is no general Arizona business license to start and operate a business within the state, many municipalities and counties do. Municipalities often require firms to obtain a permit if they are based in or operate within the municipality’s boundaries. Most general business licenses also require the business owner to operate safely and comply with the community’s appearance standards or other regulations.
Tax or income licenses are required for most entities that sell goods or provide services for a fee. The licenses allow the owners to pay city, state, or federal sales and income taxes.
Regulatory or professional licenses are typically regulated by state or federal agencies associated with a specific industry or occupation. Occupational licenses normally require education and training, along with regulations to ensure that the business or professional understands and agrees to follow the industry or occupational standards.
Do you need a business license in Arizona?
The State of Arizona does not require general business licenses, though most municipalities and counties
have license or permit requirements. However, Arizona does require licenses or permits for specific industries and occupations. Among the sites that can help guide your assessment of the licenses and permits needed are Arizona Business One Stop and Arizona Commerce Authority.
How much does a business license cost in Arizona?
You may be wondering, how much is a business license? The answer is, that it varies from state to state. In Arizona, it varies by location and level of government entity, so this article provides only guidelines or examples of the expense. The types of business licenses in Arizona and their cost can be broken down as follows:
City business license
Most local business licenses cost $250 or less. Some charge a flat fee, while others base their fees on the business’s square footage, and still others base their fees on the nature of the company. Cities like Scottsdale charge an initiation fee ($100) and an annual fee ($175), while others charge lower amounts and do not have an initiation fee.
Localities often require licenses or certificates of occupancy for those operating home-based businesses and commercial spaces so they can ensure you meet their zoning and safety requirements. To confirm the necessary local business licenses, contact the city or township clerk for the information and requirements.
County business license
Arizona counties typically do not require general business licenses; however, some may have zoning or land use approval processes in unincorporated areas, as well as building and environmental health permitting, and licenses for regulated activities such as alcohol sales or contracting.
State-level licenses and permits
Businesses operating in Arizona need a Transaction Privilege Tax (TPT) License to sell goods or provide taxable services or uses. The TPT costs $12 per location, with applications submitted through AZTaxes.gov. However, the Arizona Department of Revenue indicates that TPT licenses cost between $2 and $50, depending on the municipality. Alternatively, you can submit the Joint Tax Application, used by both the Arizona Department of Revenue and the Economic Security Department, which covers transaction privilege tax, use tax, and Employer Withholding and Unemployment Insurance.
For professional licenses, Arizona’s legislature establishes the state licensing boards for each profession, and those boards determine the licensing fees. Arizona’s professional fees are generally lower than other states. Within Arizona, the fees are highest for dental, medical, and mental health professionals, as well as building contractors.
Federal licenses and permits
Federal regulatory licenses pertain to businesses operating specific equipment, performing certain functions, or operating in industries covered by state or federal regulations. The U.S. Small Business Administration provides a helpful guide to determine whether your organization is eligible for coverage.
The Small Business Administration lists the following business categories are require licenses:
- Agriculture
- Alcoholic Beverages
- Firearms, Ammunition, and Explosives
- Fish and Wildlife
- Mining and Drilling
- Radio and Television Broadcasting
- Transportation and Logistics
Federal business license fees vary considerably based on industry, number of business locations, and revenues or other volume measurements. For example, farms that buy or sell in excess of one ton of fresh or frozen fruits and vegetables per day must have a Perishable Agricultural Commodities Act (PACA) license, which costs $995 plus $600 per additional location, not to exceed $8,000 per year.
Examples of different industries and the different licenses they require in Arizona
The primary state-level licensing requirements in Arizona are professional and occupational licenses.
Pro Tip: The State of Arizona provides a helpful list of Professional License Information, along with links to the relevant agencies. Agriculture, alcohol sales, health care, lobbying, real estate, teaching, and weights and measures are among the listed industries and occupations. If you are involved in the sectors mentioned previously or other relevant industries, please check the link or contact the appropriate agencies.
Renewing your business license in Arizona
The process and timing of renewing your business license in Arizona vary with the type of license. The state’s TPT needs to be renewed annually and updated whenever you add or change a location, experience a change in ownership, or undergo other relevant business changes.
City and county business licenses are typically updated annually by the start of the calendar year.
Many professional licenses are renewed annually, although some, such as nursing licenses, are valid for four years; therefore, it is essential to check with your licensing agency.
Conclusion
The State of Arizona does not require general business licenses, although most localities do. It is a good practice to contact the city or township clerk in each municipality in which you have a location or practice to determine the local licensing requirements.
Before you apply for licenses, you’ll first want to establish your business structure. Learning how to start an LLC in Arizona is a key first step, as forming an LLC provides legal protection and allows you to register for taxes, open a business bank account, and apply for necessary permits.
While Arizona does not require general business licenses, most businesses are required to obtain a Transaction Privilege Tax (TPT) License. In addition, the State of Arizona may require a license based on your profession, and other licenses may apply at the federal level. Be sure to check each relevant resource provided in this article and inquire about your licensing requirements with knowledgeable sources in your industry or occupation.
FAQ
Arizona does not have general business licenses. However, if you sell products to Arizona customers online or in person, you are required to obtain a Transaction Privilege Tax (TPT), which costs $12 per location. You can submit your applications for the TPT through AZTaxes.gov
Since Arizona does not have a statewide general business license, applying for the appropriate licenses and permits depends on your location and the nature of your business. Contact your local municipality for information about their business licenses. You can check Arizona’s Professional License Information list for links to various professions that require a state occupational license. If you operate in an industry subject to federal licensing requirements, check with the relevant regulatory agency.
Processing times vary by agency and license type. Most state sales tax licenses are issued within about a week, while occupational or industry-specific licenses can take longer due to verification or inspection requirements. Applying online, paying fees promptly, and submitting complete, accurate information can help speed up approval.
LLCs with more than one member are required to obtain a federal Employer Identification Number (EIN). Otherwise, whether you have an LLC does not change your licensing requirements, as they depend on your business or occupation, as well as your location.
An LLC (Limited Liability Company) is unrelated to a business license. LLCs are a form of business structure that combines the protections of corporations with the flexibility of partnerships. License fees can be based on your business structure, but the two issues are generally independent of each other.
Failing to obtain the required licenses in Arizona can leave you liable for penalties, including fines, business closure, or imprisonment. The relevant penalties depend on the business and the licenses you failed to obtain. Failing to obtain a TPT and pay taxes can result in the need to pay back taxes plus interest.
When your failure to obtain a license potentially impacts public safety, substantial fines and imprisonment are possible.
Like the FAQ about LLCs, your business structure does not determine whether you need a business license. Licenses and permits depend on your business or occupation, as well as your location.