Transaction privilege tax deduction codes are used in Schedule A of Forms TPT-2 and TPT-EZ to deduct income exempt or excluded from tax, as authorized by Arizona statute and/or the Model City Tax Code. The same region codes used in reporting income are used in Schedule A to claim deductions of nontaxable or exempt income.
For instance, a pharmacy's income from sales of prescription drugs is specifically exempt from both state and city transaction privilege tax. The pharmacy will report all of its gross income under each correct region code and deduct the income from sales of prescription drugs on Schedule A. Appropriate taxes will then be paid on all of the pharmacy's income not deducted on Schedule A.
TPT deduction code listings provide the deduction code number, a description (often abbreviated) and the business codes for state and city business categories. A deduction code can often be used under both state and city business codes, but some deductions apply only to state business codes and some apply only to city business codes.
To make deduction codes accessible to Arizona taxpayers, ADOR posts the codes in several formats, including PDF files of all state and city deduction codes and new non-program cities deduction translations.