Residential Rental Licensing Requirements and Processes

Changes to Residential Rental Guidelines Effective January 1, 2025

Starting January 1, 2025, residential rental property owners should no longer collect and remit any city transaction privilege tax (TPT) on the income derived from long-term lodging stays of 30 days or more to ADOR. (Laws 2023, Chapter 204 and A.R.S. § 42-6004 (H)).

A.R.S. § 42-6004 (H) has been amended to prohibit a city, town, or other taxing jurisdiction from levying a transaction privilege, sales, gross receipts, use, franchise or other similar tax or fee, however denominated, on the business of renting or leasing real property for residential purposes. (Lodging spaces booked for 30 days or more.)  

Currently, there is no state or county tax imposed on residential rentals. Therefore, Arizona cities are not be able to impose a tax on residential rentals from and after December 31, 2024. Property owners must still register the property with the county assessor to comply with landlord tenant laws and other compliance requirements from government entities. Owners can still file for prior periods online even if the license has been canceled or the location has been closed.

    Please note: Hotel, motel, or other transient lodging businesses that book stays for fewer than 30 days must still collect and remit TPT under the transient lodging or hotel classification. 

    What Should I Do?
    For periods beginning January 1, 2025 and thereafter, it is no longer needed to collect, file, and pay residential rental TPT. 

    No further action or steps need to be taken to cancel the license. If you are not engaged in any other business activity and are only using business code 045, the Department may have already cancelled your license with an effective date of December 31, 2024. Be aware that cancelation of the license will not exempt you from any liabilities related to periods before January 1, 2025. If liabilities are unpaid, enforcement actions may be taken against you. Log on to AZTaxes.gov to resolve any outstanding liabilities or missing returns for the license.

    For tax periods before January 1, 2025:

    • You must comply with filing and payment requirements, and
    • These periods remain subject to audit as allowed by statute.

    Property owners who had a TPT license but did not fully report all taxable residential rental income must file amended returns, including accurate and corrected transaction details. Taxpayers who did not have a TPT license and did not report TPT in prior periods should reach out to the Residential Rental team at (602) 716-RENT (7368) or [email protected] for further assistance. When emailing, include the property address(es) and total number of rental locations in Arizona.

     

    Property Manager Licensing Requirements and Process

    All owners of property engaging the service of a property management company (PMC) for short-term lodging or commercial rentals are required to obtain a TPT license. Owners of residential rental properties are not required to obtain a TPT license after January 1, 2025.

    The PMC registration license is used to access the filing portal called the Residential Rental E-Solution. There is no fee associated with obtaining the registration license or renewing the registration license. When filing for each of the property owners (PO), the PO’s license number is used to file taxes for each individual owner’s property.

    There are multiple ways a PMC can obtain a TPT license on behalf of a PO. Either the property owner (PO) or the PMC may complete and submit a Form JT-1 if the PMC is managing a short term rental property (lodging rental for less than 30 days) or commercial rentals. PMCs that complete and submit the JT-1 application (for short-term rentals) on behalf of their PO clients must provide the appropriate Power of Attorney (POA) forms to validate their authority to act on behalf of the PO.

    Additionally, the legal name for a property should be the name used on the TPT application. For most POs, that is the owner’s name.

    Property owners with common ownership of multiple rental property locations may retain a single license that represents all locations by location number. On average, after submitting a Form JT-1, PMCs will begin receiving PO license(s) numbers within approximately 7-10 business days after ADOR receives and processes the application. Please note the importance of providing complete and accurate applications and ensuring the PMC has indicated the PMC mailing address on the application.

    PMCs that do not own and/or rent properties, and only represent POs, should cancel their existing TPT license and apply for a Property Management License Application. Nevertheless, PMCs that engage in other taxable activities must retain an active TPT license in addition to the PMC registration to report these activities.

    POs with properties in multiple cities do not need a different license for each city. A single license can represent multiple jurisdictions; however, if the PO chooses to work with multiple PMCs, a separate property management license per PMC will be required. Also, if a PO owns multiple properties and the PMCs only represent some of them, the state of Arizona will require the PO to maintain separate licenses for each PMC representing the PO.

    The fee for a license that represents multijurisdictional locations may vary per location. A list of fees can be found online on page four of the JT-1 application

    A PMC may electronically submit a registration license directly to the ADOR PMC team.

    Please note: PMCs do not have to reapply for TPT licenses on their clients who currently have them. TPT licenses that currently exist can be engaged in the PMC registration.