Many of Arizona’s state and local expenditures are paid by collecting sales tax (Arizona Transaction Privilege Tax). As with many other states, the sales tax varies from county to county. The state sales tax is 5.6 percent. A business must add the tax that the counties and other local jurisdictions impose to the state’s sales tax rate. This guide does not fully describe all of Arizona’s tax laws and regulations regarding taxes. Businesses should contact a business attorney or visit the Arizona Department of Revenue for more tax information to learn which rules and regulations are associated with their industries.
Types of taxes
Arizona has several transaction privilege taxes, including a use tax, local option sales taxes, an aircraft use tax, residential rental, and peer-to-peer car rental taxes. Most businesses pay the tax liability on a quarterly basis.
Transaction privilege tax (Sales tax)
The state’s sales tax base rate is 5.6 percent. Counties and other local jurisdictions can also add a tax rate on top of the state’s base rate. Any business that sells products and services must collect the transaction privilege taxes levied by the state and local jurisdictions.
If a business has more than one location, it can report aggregate sales on a consolidated license or have separate licenses for each location. Most goods and services are subject to sales and use taxes in Arizona.
When a business purchases something for resale but ends up using the product or service instead of reselling it, the business must pay a use tax. The use tax rate is the same as the transaction privilege tax rate of 5.6 percent. As with the transaction privilege tax, local jurisdictions may also collect an additional use tax percentage.
If a business purchases items from out-of-state for its own use and the vendor does not charge the appropriate Arizona sales tax, the business must pay a use tax for those items. For example, if a business located in Cochise County orders cleaning supplies from CleanCompany A, but CleanCompany A does not charge sales taxes, the business must pay use taxes of 5.6 percent plus 6.10 percent for a total of 11.7 percent.
Local option sales tax (Discretionary tax)
The various counties in Arizona may also charge a local option sales tax. The percentage rate varies from county to county. To find the local option sales tax for the county where your business is located, visit the Arizona Department of Revenue. Local jurisdictions may charge a different discretionary tax rate for certain items. For example, Cochise County charges an additional 6.10 percent on retail sales, while Pinal County charges an additional 7.20 percent on retail sales.
Transient rental taxes
Arizona also charges retail sales tax on transient rentals, including:
- Hotels and motels.
- Tourist homes.
- Dude ranches.
- Studio hotels.
- Bachelor hotels.
- Lodging houses.
- Rooming houses.
- Apartment houses.
- Mobile homes and house trailers.
- Private or public clubs.
- Spaces, lots, and slabs designed for temporary occupancy.
If the rental is over 30 days, the transient rental tax does not apply for mobile homes or house trailers. Additionally, online lodging marketplaces must also register with Arizona to pay taxes on online lodging transactions. Any business that provides a digital platform to facilitate renting and lodging accommodation for third parties qualify as an online lodging marketplace.
Out-of-state retailers and marketplace sellers
While outside retailers are not required to collect Arizona sales tax on behalf of Arizona residents, they may do so as a convenience to the buyer. If an out-of-state retailer sells an Arizona resident a product or service and does not collect tax, the buyer must pay use tax.
However, most outside retailers, especially the larger retailers, do charge sales tax. If the amount of sales tax is too low, the buyer must pay the difference as a use tax.
Aircraft use tax
If any business or individual purchases an aircraft from an out-of-state vendor, the buyer must pay use tax on the purchase. The Arizona Department of Transportation sends the information about the purchase to the Arizona Department of Revenue. The DOR researches the sale to see whether the vendor paid the tax for the buyer. If not, the DOR forwards a notice with the amount due to the purchaser.
Residential rental tax
Businesses and individuals, including property management companies, who rent out apartments and homes must also pay the taxes based on the Model City Tax Code for their jurisdiction on the amount they collect for rent. Some cities might also charge a percentage on top of the state rate.
Even if the owner of the property rents it to himself, he must pay the transaction sales tax. The Arizona Department of Revenue publishes a Residental Rental Licensing Matrix to help determine what a business owes in taxes.
Peer-to-peer car rental
A new taxed service is peer-to-peer car rental. Car-sharing platforms must now collect and remit sales taxes on rentals through their platforms. Any business that uses a platform so that others can rent vehicles for a fee is included. For example, Uber and Lyft are peer-to-peer car-sharing companies that use a platform for those who need a ride use to locate someone willing to rent his or her time and car for a ride.
Traditional car rental companies are not included in this new law, even if they use an online platform to rent their cars.
Registering for Arizona's taxes
To register to pay Arizona sales tax, use tax, and certain other taxes, complete the Arizona Joint Tax Application (JT-1) Form and mail it to the address on the form. This is the method that takes the longest.
A business can also register at AZTaxes.gov. Businesses use the same website to file and remit the sales taxes they collected.
The third way is to download the form, complete it, then visit one of the offices to deliver the completed JT-1 Form directly. Arizona has three offices you can hand-deliver completed forms to:
- Phoenix Office, 1600 W. Monroe, Phoenix, AZ, 85007
- Mesa Office, 55 N. Center, Mesa, AZ 85201
- Tucson Office, 400 W. Congress, Tucson, AZ 85701
If you have more than one business location, you can get one license number for all locations, or you can opt to apply for a different license for each location.
It takes three to five business days to process the application if you drop it off or apply online. However, if you mail the form in, you must add mailing time to the wait time.
Arizona tax exemptions
Arizona classifies exemptions for each business classification. A business can find its exemptions by visiting A.R.S. Title 42, Chapter 5, Article 2. A business must provide a tax-exempt form when required. Download and complete the appropriate exemption certificate form for your business.
To obtain a tax exemption, provide a copy of the resale certificate to the vendor at the time of the business’s purchase.
Calculating Arizona's sales and use tax rates
When calculating a business’s tax obligation, add any local tax obligations to the state’s sale tax rate. For example, the state’s rate is 5.6 percent. If the county your business is located in charges 6.10 percent, the tax you must collect and remit to the Arizona Department of Revenue is 11.7 percent.
You can also use the tax lookup function to determine the taxes you should charge for online sales in Arizona.
Filing and paying Arizona's sales and use taxes
Once a business taxpayer completes the sales tax return, you can upload it and remit the taxes due through its online account. Arizona provides a chart showing the various due dates and processing times. Arizona uses a statutory return due date, quarterly return due date, and an annual return due date.
If you make an electronic payment prior to 5:00 p.m. on the day before the last business day, the department will receive the return on the last business day. Thus, do not wait until the due date to file the taxes when filing electronically.
The quarterly tax due dates are on the 20th of each month following the prior quarter. For example, the first quarter’s taxes – those collected from January through March, are due on April 20.
In 2022, Arizona filers must pay the state transaction sales tax of 5.6 percent in addition to any taxes levied by local jurisdictions on sales of goods and services.
Most retail sales of tangible personal property are taxed in Arizona.
Yes. However, if you lease or rent less than five rooms and occupy the home, and you do not furnish meals other than breakfast, and you do not rent the rooms in your home more than 50 percent of the year, you do not have to pay sales taxes.
Yes. You must pay Arizona’s use tax of 5.6 percent plus any local sales tax (discretionary taxes)on the sales and use tax return.
No. You can download Form JT-1 and mail it in or take it to one of the three Arizona Department of Revenue Offices in Phoenix, Mesa or Tucson.
The primary user is the person who maintains the online account. Each account can have only one primary user, usually the owner or an officer of the business.
A delegate user is someone the primary user authorizes to use the primary user’s account. Common examples of delegate users are the business’s certified public accountant, an additional offer, or an office manager.