Transaction Privilege Tax
Although commonly referred to as a sales tax, the Arizona transaction privilege tax (TPT) is actually a tax on a vendor for the privilege of doing business in the state. Various business activities are subject to transaction privilege tax and must be licensed.
If a business is selling a product or engaging in a service subject to TPT, a license from the Arizona Department of Revenue (ADOR) would likely be needed as well as a transaction privilege tax or business/occupational license from the city or cities in which the business is based and/or operates.
ADOR collects the tax for the counties and cities; however, tax rates vary depending on the type of business activity, the city and the county.
Please note that businesses with multiple locations or business lines can opt to license and report for each location separately or have a consolidated license (and report aggregate sales). The cost for each license per location is $12.
TPT and Use Tax:
Individuals are subject to use tax when a retailer does not collect tax for tangible personal property used, stored or consumed.
Those individuals and businesses subject to use tax include the following:
- An out-of-state retailer or utility business making sales of tangible personal property to Arizona purchasers.
- Arizona residents who purchase goods using a resale certificate, and the goods are used, stored or consumed in Arizona contrary to the purpose stated on the certificate.
- Arizona residents who purchase goods in which another state’s sale tax or other excise tax was imposed and the rate of that tax is less than Arizona’s use tax rate.
See our Reporting Guide for convenient access to TPT-related guidance and resources.
See the TPT Estimated Payment page for information and how to make payments.
What’s New with TPT?
New Age Rule for TPT License
Effective September 14, 2024, persons under the age of 19 may operate a business without a transaction privilege tax (TPT) license if that business does not generate more than $10,000 in gross income in a calendar year. See Arizona Revised Statutes (A.R.S.) § 42-5045.
Additionally, persons under the age of nineteen and who operate a business occasionally, are not required to have any type of license or permit for business for city and county purposes. Please reach out directly to the relevant city or county with business license or permit questions.
If a person under the age of nineteen is currently operating a business with a TPT license (with an adult included on the license) and the business does not generate more than $10,000 in gross sales per year, then the license may be cancelled with the effective periods starting October 1, 2024. Please ensure that returns are filed based on the filing frequency assigned at the time of registration. If a filing is missed or a final return is not filed prior to cancellation of the TPT license, then penalties and interest may accrue. See instructions on how to cancel a TPT license.
Residential Rental Tax Changes
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)).
This applies to licensees that are registered and have filed using business code 045 indicating that license is engaged in the business classification of residential rental. Residential rental is the rental of real property for a period of 30 or more consecutive days for residential (i.e. noncommercial) purposes only.
Currently, there is no state or county tax imposed on residential rentals, and the upcoming change to the tax law will eliminate the city TPT. While there will no longer be a city TPT obligation beginning January 1, 2025, you 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.
For tax periods before January 1, 2025:
- You must still comply with filing and payment requirements, and
- These periods remain subject to audit as allowed by statute.
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?
Please continue to collect, file, and pay residential rental TPT for periods through December 31, 2024, filed in January 2025. 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. 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.
Tax Rate Change
For tax rate changes, please visit Model City Tax Code's Rate and Code Updates and TPT Newsletters.
Arizona Business One Stop is an online portal that provides a single online location with personalized tools to plan, start, grow, move and close businesses in Arizona. It is a secure digital experience that does not require in-person interaction.
Arizona-based businesses should visit Business One Stop (B1S) if forming their business for the first time. Please note: New Business One Stop TPT licenses submissions will direct you to pay at AZTaxes.gov. TPT filings, payments, and renewals are only available at AZTaxes.gov at this time.
Businesses needing updated information on transaction privilege tax can access ADOR’s monthly newsletter, TPT Tax Rate Table and Model City Tax Code changes here by clicking on the appropriate month and year. For older information, please visit our archives.
Businesses can also subscribe to ADOR’s TPT newsletter and get updates through email or text alerts. They can receive notices regarding TPT due dates, city tax rate changes, license renewals and new features on AZTaxes.gov.