Phoenix Sales Tax: Rate Breakdown, Exemptions, and Use Tax

The Phoenix sales tax rate is 8.6 percent on most retail purchases. That total combines a 5.6 percent Arizona state tax, a 0.7 percent Maricopa County tax, and a 2.3 percent City of Phoenix tax.¹ Arizona technically calls this the Transaction Privilege Tax rather than a sales tax, because the legal obligation falls on the seller rather than the buyer, but it shows up on your receipt the same way a sales tax would.²

How the 8.6 Percent Breaks Down

Three governments share every taxable sale made inside Phoenix city limits:

Arizona state: 5.6 percent, the same across all counties³
Maricopa County: 0.7 percent, which funds transit and county operations
City of Phoenix: 2.3 percent on standard retail, directed to municipal services like police, fire, and infrastructure

Phoenix also applies a reduced rate on the portion of a single retail item above a set dollar threshold, which brings the combined rate down to 8.3 percent on that excess amount. On a large single-item purchase, part of the price is taxed at 8.6 percent and part at 8.3 percent.

When the Rate Is Different

Not every purchase in Phoenix uses the 8.6 percent retail rate. The TPT system taxes specific business activities, and each activity has its own rate combination.

Restaurants and Bars

Food and drink sold at restaurants and bars are taxed under a separate classification. The state-and-county combined rate for this category is 6.3 percent, with the Phoenix city portion added on top.³ Prepared food sold at delis follows the same rule.

Hotels and Short-Term Rentals

Stays under 30 consecutive days fall under transient lodging and carry a noticeably higher combined rate. The state-and-county portion alone runs 7.27 percent, and Phoenix adds its own hotel-specific city rate on top of that.³ A hotel bill in Phoenix will be taxed well above the 8.6 percent you’d see at a store.

Amusements

Businesses that charge admission or user fees for entertainment — concerts, sporting events, bowling alleys, movie theaters — are taxed under the amusements classification rather than retail.⁴

Commercial Leases

Phoenix taxes commercial real property rent, including insurance reimbursements, common area maintenance charges, and payments for leasehold improvements. Some Arizona cities tax commercial leases and others don’t; Phoenix does.⁵

Construction

Arizona splits construction into modification contracting (new construction and major alterations) and MRRA contracting (maintenance, repair, replacement, or alteration of existing structures), each with its own tax treatment.⁶ If you’re paying a contractor, how your project is classified affects how the tax shows up in the price.

For the exact rate on any specific business activity, the current rate table on the Arizona Department of Revenue site is updated monthly and is the only reliable confirmation.

What Phoenix Does Not Tax

Arizona does not impose state TPT on food purchased for home consumption. Groceries are exempt at the state level, so the 5.6 percent state portion and 0.7 percent county portion do not apply to most unprepared food items. City-level treatment of groceries can vary. Prepared food sold at restaurants and delis stays fully taxable regardless.

Purchases made for resale also avoid TPT, provided the buyer gives the vendor Arizona Form 5000A, the Resale Certificate, at the time of purchase.⁷ The vendor keeps it on file. Using a resale certificate for items you actually consume in your own business, rather than resell, is one of the easiest audit triggers the state has.

Nonprofit and religious organizations are not automatically exempt. Arizona does not provide a blanket TPT exemption for nonprofits, so sales to churches, schools, and charitable organizations are generally taxable, and the organizations themselves owe TPT if they engage in taxable business activities.⁸

Use Tax on Out-of-State Purchases

If you buy taxable goods from an out-of-state vendor who did not collect Arizona TPT, you owe use tax on those purchases. The state use tax rate is 5.6 percent, and it is self-assessed, meaning the buyer reports and pays it. This commonly comes up with online purchases from vendors without Arizona nexus, equipment bought at out-of-state trade shows, or supplies ordered from catalogs. If the other state’s sales tax rate was lower than 5.6 percent, you owe the difference.

For individual consumers, large online retailers generally collect Arizona tax at checkout once their sales into the state cross the economic nexus threshold of $100,000 in gross sales during the current or previous calendar year.⁹ Marketplace facilitators such as Amazon, eBay, and Etsy are required to collect and remit TPT on behalf of their third-party sellers once the facilitator crosses that same $100,000 threshold.

If You’re the Seller, Not the Buyer

Because the legal obligation runs to the seller, any business engaged in a taxable activity in Phoenix needs a TPT license before it starts operating. The application is Form JT-1, the Joint Tax Application, filed through the Arizona Department of Revenue.¹⁰ The City of Phoenix charges a $50 license fee, due within 30 days of the business start date, and the license must be renewed each year.¹¹ All filings, payments, and renewals go through AZTaxes.gov.

Filing frequency depends on your estimated annual combined tax liability: annually under $2,000, quarterly between $2,000 and $8,000, and monthly above $8,000.¹²¹³¹⁴¹⁵

1
City of Phoenix. Current Combined Tax Rates (Phoenix, State, County)
2
Arizona Department of Revenue. Transaction Privilege Tax
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Arizona Department of Revenue. Transaction Privilege and Other Tax Rate Tables
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Arizona Department of Revenue. Amusements
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Arizona Department of Revenue. Commercial Lease
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Arizona Department of Revenue. Contracting Guidelines
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Arizona Department of Revenue. Arizona Resale Certificate
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Arizona Department of Revenue. Non-Profit Organizations (Publication 501)
9
Arizona Department of Revenue. Out-of-State Sellers
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Arizona Department of Revenue. Arizona Joint Tax Application (JT-1)
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City of Phoenix. Transaction Privilege (Sales) and Use Tax License Fees
12
Arizona Legislature. Arizona Revised Statutes 42-5014 – Return and Payment of Tax
13
Arizona Department of Revenue. Due Dates
14
Arizona Legislature. Arizona Revised Statutes 42-1125 – Civil Penalties
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Arizona Department of Revenue. Interest Rates