The Arizona Department of Revenue (Department) is responsible for administering the transaction privilege tax (TPT) on behalf of the State, counties, and cities and towns. TPT is a tax imposed on a seller for the privilege of doing business in the State and is commonly referred to as a sales tax because it is usually passed on to the buyer. The Department collected approximately $10.9 billion in TPT revenue in fiscal year 2018, of which approximately $3 billion was on behalf of cities and towns. We identified several areas where the Department should improve its administration of TPT. These include ensuring that businesses have active and accurate TPT licenses, detecting potential underreporting and misreporting of TPT owed and correcting errors on TPT returns, enforcing statutory filing requirements, correctly distributing TPT collected on behalf of cities and towns, and collaborating with cities and towns on TPT audits and collections efforts.