Residential Rental Licensing Requirements and Processes
For 2018, and according to the Model City Tax Code, all owners of taxable property engaging the service of a property management company (PMC) are required to obtain a TPT and use tax license, regardless of the owner engaging a property manager or other broker to oversee the owner’s business activity, including filing tax returns on behalf of the owner.
For a PMC Registration License, there is no associated fee, renewal or filing obligation. The 2018 renewal billings will go to each licensed business and will follow the same format as the 2017 notices. A PMC must obtain a successful PMC registration to have access to the Residential Rental E-Solution for PMCs.
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 Residential Rentals ONLY Application. PMCs that complete and submit these applications 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 Residential Rentals Only Application, 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 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. The information is also available on the back of the Residential Rentals Only Application.
A PMC may electronically submit a registration license directly to the 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 to PMC registration.
There is also still a limitation of 999 locations per property owner for TPT licenses; however, for PMC registration, this is a different process since PMCs are now engaged to their clients’ TPT licenses. PMCs will not deal with limitations on the number of linked PO TPT licenses.
Once the processing of a PMC registration application is complete, the PMC must notify ADOR to cancel the TPT license.
Additionally, on a PO’s TPT license for LLCs, there are some challenges because the owners do not want to provide their social security numbers (SSN). However, in the state of Arizona, businesses required to file and remit TPT must also complete the JT-1 application. The disclosure of business owners, officers, members, partners or managers, as well as their individual SSN as identifying information, is a requirement, and ADOR can ask for this information. This requirement is consistent with 44 other states.
PMCs must file and remit taxes on behalf of client property owners using the PO's license numbers on AZTaxes.gov. To participate in the e-file solution, PMCs must complete and submit the Property Management License Application. Also, to obtain licenses for individual property owners, a PMC with a POA on file with ADOR will need to complete and submit a Residential Rentals Only Application on behalf of property owners.
Residential Rental Engagement and Disengagement
If POs have a TPT license, a PMC will connect or “engage” (please click here for Residential Rental Acronyms and Definitions) the POs’ TPT licenses to the PMC’s registration license for filing and paying on their behalf. The PMC may engage licensed POs assuming that all information is available, such as the PO license number and exact business name. The PO will then be added to the PMC’s user profile on AZTaxes.gov. POs do not need to establish an AZTaxes.gov user profile separately.
PMCs should note that the engagement date is not retroactive to when the PMC first started managing, but will either be effective Jan. 1, 2018 or the current date. Although the date is not retroactive, the date can reflect up to one year in the future.
PMCs should also note that the engagement process is different than linking. A PMC can update, cancel and file an individual TPT license during the linking process. If a PMC obtains a new client, the PMC can engage immediately, or before the PMC files for the period return. PMCs with clients who prefer to file and pay on their own to the PMC registration license are not required to engage those clients on AZTaxes.gov.
If an owner leaves a PMC, the old PMC must disengage on the last period collected, otherwise the old PMC is still responsible to file and pay. The PO may disengage the PMC by calling ADOR at 800-352-4090. No other communication or disclosure is required.
Currently, ADOR has new opportunities for electronic file and pay services. Based on recent law changes to both electronic filing and payment laws, a business with more than one location has to file electronically. Also, when not paying electronically, a business must remit payment with the Form TPT-V (voucher). With the electronic solution, ADOR will no longer mail any TPT returns to taxpayers.
The new electronic file and pay requirements took effect for tax periods on or after January 2018. Residential Rental filers began using this method to file the January 2018 period in February 2018.
- $5,000 in annual TPT liability in 2020
- $500 in annual TPT liability in 2021 and beyond
There is also an electronic funds transfer (EFT) penalty of five percent. Please note that the thresholds for electronic filing and payment requirements apply to the licensee, or taxpayer/PO.
In addition, current ADOR technology permits the use of electronic check; therefore, when making a payment for all licenses in one lump sum, the debit from the account will appear as individual debit transactions. As technological updates become available, ADOR will send out communications via AZTaxes.gov. ADOR unfortunately cannot store bank account information via AZTaxes.gov in the e-filing solution upload format.
Next, many question whether or not they can file a TPT return on one period date when renters prepay rent for either a three or six-month season rental. That depends because the selected filing frequency determines the filing of a return. If a taxpayer is seasonal, a return is due for every month indicated. If a taxpayer is monthly, a return is due every month. If the taxpayer is quarterly, a return is due at the end of each quarter. If a taxpayer is annual, one return is due at the end of that filing period. A businesses must file a transaction privilege tax return even if there is no tax liability due for the tax period.
The e-file solution allows for bulk filing for all POs and is available on a single form up to 7,000 rows. PMCs should report one location per line. PMCs may report on behalf of licensed clients in the following business classifications:
- Transient Lodging
- City Hotel
- City Additional Transient Lodging
- Commercial Lease
- Residential Rental
Also, the new e-solution template will not pre-populate the previous month’s reporting information. However, PMCs can upload information directly into AZTaxes.gov.
Once the e-file payment is complete, PMCs will receive separate confirmation emails per TPT return filed. Confirmation numbers are also accessible under the menu option "E-File TPT Return History". POs must be enrolled on AZTaxes.gov and linked to the PMC to view this information.
PMCs can also upload multiple files and make payments, which is an effective solution for PMCs that represent POs with varying filing frequencies. PMCs want to ensure each file does not repeat TPT license numbers to avoid unnecessary errors.
Finally, if a PMC needs to complete an amended return on an individual TPT, that amended return cannot be filed using the e-file solution. However, there is an electronic option as the individual PO's TPT returns can be amended by the PO or the PMC as a delegate on the PO’s AZTaxes.gov account.
With the 2018 implementation of the PMC registration, an updated Form 285-PMC is required. PMCs can visit ADOR’s Residential Rental Guidelines, or contact us here. A POA is an agreement between the PMC and client.
Please note that ADOR requires a wet/live signature for the POA; but an e-signature is equivalent on AZTaxes.gov.
For a POA, an owner, managing member or partner of the company will need to sign the document. There is no wait time after ADOR receives the POA before a PMC can talk to ADOR. Upon electronic submission by PMCs, ADOR processes Form 285-PMC electronically and make them immediately available to the authorized customer service representative upon inquiry.