The determination of the number of businesses operating in Arizona is not a straightforward proposition due to data deficiencies and definitional issues. The best data — from the U.S. Census Bureau — are more than two years old. The Census Bureau data are divided into two series: businesses with employees and nonemployer businesses. Each series is based on administrative records. While neither series is affected by sampling error, both are subject to nonsampling error. Certain industries are excluded from each series.

The transaction privilege tax (TPT), often referred to as the sales tax, is a major source of revenue for state and local governments in Arizona. The TPT is applied to numerous categories, such as contracting and utilities. The analysis in this paper is limited to the retail category, which accounts for half of the TPT collected by state government, and the restaurant and bar category, which contributes one-tenth of the TPT revenue.