Arizona sales tax starts at a 5.6% state rate, but what you actually pay at the register runs higher once your county and city add their own percentages, with combined rates generally landing between about 7% and over 10% depending on where you shop.1Arizona Department of Revenue. Understanding Use Tax Technically, Arizona doesn’t have a sales tax at all. It has a transaction privilege tax (TPT) charged to the seller for the privilege of doing business in the state. Sellers almost always pass the cost to customers, so for most people the difference is invisible.
Why Arizona Calls It a Privilege Tax
In most states, the sales tax is a tax on the buyer and the seller just collects it. Arizona flips that. The business owes TPT to the Arizona Department of Revenue (ADOR) whether or not it collects the equivalent amount from customers.2The University of Arizona. Arizona Transaction Privilege (Sales) and Use Tax If a shop runs a “no tax” promotion or forgets to charge TPT, it still owes ADOR the full amount.
TPT covers 16 business classifications, each with its own rules and sometimes its own rate. Retail is the one most consumers see, but others include restaurants and bars, hotel lodging, utilities, telecommunications, personal property rentals, prime contracting, and amusements.3Arizona Legislature. Arizona Revised Statutes 42-5010 – Rates; Distribution Base A business operating across multiple classifications may owe tax at different rates on different parts of its revenue.
How Much You’ll Actually Pay
Every taxable purchase in Arizona carries up to three layers: the 5.6% state rate, a county excise tax (typically under 1%), and a city privilege tax. The state rate is the same everywhere. County rates are modest. City rates do most of the work driving the differences you see from one zip code to the next.
Here are combined retail rates effective January 2026 for three major cities:
- Phoenix: 8.6% (5.6% state + 0.7% Maricopa County + 2.3% city)
- Scottsdale: 8.05% (5.6% state + 0.7% county + 1.75% city)4City of Scottsdale. Taxes
- Tucson: approximately 8.7% (5.6% state + 0.5% Pima County + 2.6% city)2The University of Arizona. Arizona Transaction Privilege (Sales) and Use Tax
City rates shift regularly. ADOR publishes updated rate tables monthly, broken out by jurisdiction and classification.5Arizona Department of Revenue. Tax Rate Table6Arizona Department of Revenue. TPT Rate Table Effective January 1, 2026 If you need a current number for a specific address, that table is the authoritative source.
What’s Exempt from Arizona Sales Tax
Arizona exempts several categories of goods from the retail classification under ARS ยง 42-5061. The ones that affect everyday spending:
- Groceries. Food for home consumption is exempt. Prepared food from restaurants or eaten on-site stays taxable.7Arizona Legislature. Arizona Revised Statutes 42-5061 – Retail Classification; Definitions
- Prescription drugs and medical devices. Prescription medications, insulin, glucose test strips, prescription eyeglasses, contact lenses, hearing aids, and prosthetic devices are all exempt.7Arizona Legislature. Arizona Revised Statutes 42-5061 – Retail Classification; Definitions
- Professional and personal services. Occupations where any transfer of tangible property is incidental to the service (legal, accounting, consulting work) fall outside the retail classification.7Arizona Legislature. Arizona Revised Statutes 42-5061 – Retail Classification; Definitions
Purchases made with SNAP benefits are also excluded from the tax base. One caveat: exemptions are specific to each business classification, so an item exempt under retail could still be taxable under a different classification.
Use Tax on Out-of-State Purchases
If you buy something from an out-of-state seller who doesn’t charge Arizona TPT, you owe use tax directly to ADOR at the 5.6% state rate.1Arizona Department of Revenue. Understanding Use Tax This covers online purchases, catalog orders, and anything shipped into Arizona for your use. Most people don’t realize this obligation exists, but the rule is simple: if you used it in Arizona and no tax was paid, you owe use tax.
Casual sales between individuals are exempt. So are items that would be exempt from TPT in the first place, such as prescription medications and groceries.1Arizona Department of Revenue. Understanding Use Tax Individuals can remit use tax payments directly to ADOR by mail.
If You Sell: Licensing, Filing, and Penalties
You need a TPT license before conducting taxable business in Arizona. The application is Form JT-1, the Joint Tax Application, which handles TPT registration and employer withholding in one form.8Arizona Department of Revenue. Applying for a TPT License License fees are set by each city and generally run from $1 to $50 per location. Phoenix and Scottsdale charge $50.9Arizona Department of Revenue. License Fees, Cancellation and Other Changes
Licenses must be renewed every year by January 1. Renewals submitted after January 31 trigger a penalty of 50% of the city renewal fee.10Arizona Department of Revenue. TPT Update – January 2026 If you’ve stopped operating, cancel the license. Letting it sit active generates fees and penalties whether or not you make sales.
How Often You File
ADOR assigns a filing frequency based on your estimated annual combined tax liability:
- Annual: less than $2,000
- Quarterly: $2,000 to $8,000
- Monthly: more than $8,00011Arizona Department of Revenue. TPT Filing Frequency
Monthly returns are due by the 20th of the following month. Quarterly returns are due by the 20th of the month after the quarter ends (April 20, July 20, October 20, and January 20).12Arizona Department of Revenue. Due Dates Even if you had zero sales during a period, you still have to file a $0 return. Skipping it counts as a missed filing.
Businesses with an annual total tax liability of $500 or more must file electronically through AZTaxes.gov.10Arizona Department of Revenue. TPT Update – January 2026 Paper filing when you’re required to e-file triggers a separate penalty of 5% of the tax due or $25, whichever is greater, per occurrence.13Arizona Legislature. Arizona Revised Statutes 42-1125 – Civil Penalties; Definition
What Late Filing or Payment Costs
Arizona treats late filing and late payment as separate violations.
Late filing runs 4.5% of the tax due per month or partial month overdue, with a $25 minimum and a cap at 25% of the tax due or $100, whichever is greater.13Arizona Legislature. Arizona Revised Statutes 42-1125 – Civil Penalties; Definition Late payment adds 0.5% of the unpaid tax per month or partial month, up to 10%.14Arizona Department of Revenue. FAQ Unpaid balances also accrue interest at the federal short-term rate plus three percentage points, compounded annually, with ADOR rolling outstanding interest into principal on January 1.15Arizona Legislature. Arizona Revised Statutes 42-1123 – Interest All three can stack.
Resale and Exemption Certificates
If you’re buying inventory you plan to resell, you don’t owe TPT on those purchases, but you need Form 5000A (the Arizona Resale Certificate) filled out completely and handed to the vendor at the time of sale.16Arizona Department of Revenue. Arizona Resale Certificate For other exempt purchases, such as sales to government entities or qualifying nonprofits, vendors use Form 5000. Only one exemption category can be claimed per certificate, and ADOR will not accept incomplete forms during an audit.17Arizona Department of Revenue. TPT Exemption Certificate – General
Special Cases to Watch
Remote Sellers and Marketplaces
Out-of-state businesses must collect and remit TPT once they cross $100,000 in gross Arizona sales in the current or prior calendar year.18Arizona Department of Revenue. Economic Threshold The same threshold applies to marketplace facilitators like Amazon or Etsy. If you sell through a registered marketplace that collects TPT for you, those sales don’t count toward your personal threshold; you only register and collect on your own direct sales over $100,000.19Arizona Department of Revenue. Out-of-State Sellers A physical location, warehouse, or employees in Arizona create nexus immediately, regardless of sales volume.
Construction Contractors
Construction work falls under prime contracting, which taxes 65% of the gross contract price at a 5% state rate, with county and city taxes layered on top.20Arizona Legislature. Arizona Revised Statutes 42-5075 – Prime Contracting Classification; Exemptions; Definitions Maintenance, repair, replacement, and alteration (MRRA) on existing property is excluded from prime contracting and taxed under retail based on the materials used. An alteration project crosses into prime contracting when it exceeds 25% of a residential property’s tax-assessed value, or $750,000 for commercial property.21Arizona Department of Revenue. MRRA Contracting
Tribal Land
Sales on Native American reservations follow different rules depending on who sells and who buys. When both parties are tribal members, Arizona TPT does not apply. When a non-tribal seller sells to a non-tribal buyer on reservation land, regular TPT applies. A tribal seller to a non-tribal buyer is exempt from TPT, though the buyer may owe use tax. A non-tribal seller to a tribal buyer on the buyer’s reservation is also exempt.