The Tempe sales tax rate is 8.1% on most retail purchases. That total combines Arizona’s 5.6% state transaction privilege tax (TPT), Maricopa County’s 0.7% excise tax, and Tempe’s own 1.8% city rate.1Arizona Department of Revenue. Arizona State, County and City Transaction Privilege and Other Tax Rate Tables Arizona calls it a transaction privilege tax rather than a sales tax because it is technically levied on the business for the privilege of operating in the jurisdiction, but almost every seller passes the cost to the customer at the register.2Arizona Department of Revenue. Transaction Privilege Tax
Rates on Special Categories
The 8.1% figure covers typical retail. A few categories work differently.
Hotels and short-term rentals carry an extra 5% city hotel tax on top of the standard combined rate, reported under business code 144.3Arizona Department of Revenue. Tempe If you book a room through an online platform, the platform usually collects it, but the rate still applies to your stay.
Groceries are the category that most often catches shoppers off guard. Food for home consumption is exempt from the 5.6% state TPT and the 0.7% county excise, but Tempe applies its full 1.8% city rate. A 2023 state bill that would have barred cities from taxing groceries was vetoed, so Tempe continues to tax food purchases.4Arizona Legislature. Arizona State Senate Fact Sheet for SB 1063 HB 2061 – Food Municipal Tax Exemption5City of Tempe, AZ. Transaction Privilege Tax (TPT or Sales Tax)
Long-term residential rent is no longer taxed. As of January 1, 2025, Arizona law prohibits cities from imposing TPT on residential rental income from stays of 30 days or more, so landlords renting houses or apartments on a long-term basis in Tempe owe no city TPT on that income.6Arizona Department of Revenue. Residential Rental Guidelines Rentals under 30 days still fall under transient lodging and remain taxable.
What Businesses Owe at the City Level
Tempe’s 1.8% city rate applies broadly. Retail sales of tangible personal property, restaurants and bars, amusement, job printing, advertising, publishing, contracting, rental of tangible personal property, commercial leasing, and telecommunications all carry the same city rate.3Arizona Department of Revenue. Tempe5City of Tempe, AZ. Transaction Privilege Tax (TPT or Sales Tax) If you lease office or retail space in Tempe, the landlord owes TPT on the rental income.
Goods bought for resale are exempt, which keeps inventory from being taxed at every step of the supply chain. Documentation uses an Arizona Resale Certificate.7Arizona Department of Revenue. Arizona Resale Certificate Machinery and equipment used directly in manufacturing also qualify under specific conditions.
When a Tempe business buys taxable goods from an out-of-state seller that doesn’t collect Arizona TPT, the buyer owes use tax instead. Tempe’s use tax rate matches its 1.8% TPT rate, with state and county use tax applied on top, and businesses self-assess it on the same return they use for other TPT obligations.5City of Tempe, AZ. Transaction Privilege Tax (TPT or Sales Tax)
Getting Licensed
Any business engaged in a taxable activity in Tempe needs a TPT license before its first sale. You register through the Arizona Joint Tax Application (Form JT-1), which covers both the Arizona Department of Revenue and, where applicable, the Department of Economic Security.8Arizona Department of Revenue. Applying for a TPT License
The state charges $12 per license per location.9Arizona Department of Revenue. TPT License Tempe adds a $50 city license fee, bringing the total to $62 per location.3Arizona Department of Revenue. Tempe Multiple locations under the same ownership can sometimes be consolidated under a single license.
Filing and Filing Frequency
Filing and payment both happen through AZTaxes.gov. You select the period, enter gross receipts by business activity code, and the system calculates the combined state, county, and city tax owed. Payment is electronic.2Arizona Department of Revenue. Transaction Privilege Tax
How often you file depends on estimated annual combined tax liability across all jurisdictions:10Arizona Department of Revenue. TPT Filing Frequency
- Monthly if more than $8,000
- Quarterly between $2,000 and $8,000
- Annually if less than $2,000
The Department of Revenue assigns your frequency when you receive your license, based on what you report on the JT-1, and will adjust it if your liability crosses a threshold.
Penalties if You File or Pay Late
Late filing triggers a penalty of 4.5% of the tax due for each month or partial month the return is unfiled, with a $25 minimum, capped at 25% of the tax due or $100, whichever is greater.11Arizona Legislature. Arizona Code 42-1125 – Civil Penalties Definition
Late payment carries its own penalty: 0.5% of the unpaid tax per month, up to 10%. When both apply to the same period, the combined cap is 25%.11Arizona Legislature. Arizona Code 42-1125 – Civil Penalties Definition
Businesses required to file electronically face an additional 5% penalty (minimum $25) for submitting on paper, and the same 5% applies to those required to pay electronically who send a check. If the Department demands a return and you still don’t file, the penalty rises to 25% of the tax or $100, whichever is greater.12Arizona Department of Revenue. TPT Notices and Correspondence Resource Center Penalties can be waived for reasonable cause, but forgetting a deadline doesn’t meet that standard.