Short Term Rental Taxes In Arizona

Transient Lodging Tax Collection and Remittance in the State of Arizona

Arizona calls its general tax on entities that do business in the state a Transaction Privilege Tax’ (TPT). Among the many categories of TPT is one called a Transient Lodging Tax (TLT) that applies to transient rentals. For the purposes of the state of Arizona, a transient rental is one that is 29 days or less.

Everyone who rents property owes the taxes, but who collects that taxes depends on if a marketing channel is used. Also what type of marketing channel they are.

The state recently updates its laws (2019) so that transient lodging taxes are required to be collected by so-called Online Market Places (OLM). This is any online marketplace that collects rent on your behalf and does not have a direct business or contract relationship. Effectively, this applies only to sites such Airbnb, HomeAway, but not to a local real estate agent. Even if your real estate agent uses a rental website.

This is well documented by Arizona with this document: Online Marketplace Guidelines. This document describes who is required to collect taxes on the homeowners behalf. As well as who isn’t.

The state requires OLMs to register under the new law and submit taxes. The state has carved out a special tax designation for OLMs. In practice, their taxes rates can be different than everyone else.

However, other entities (such as the real estate agent) that manage your rental will still be required to setup a state tax account. This account registration is separate from what is required for OLMs. They would be responsible for collecting the TPT on your behalf.

Therefore, for each type of marketing channel, you need to verify that the transient lodging taxes are collected. If no one collects them on your behalf, you will need to setup your own tax account with the state.

Statewide Tax Rate

Arizona TPT: 5.5% of the listing price including any cleaning fee for reservations 29 nights and shorter.

Do I Need To Pay?

All rental activity is covered. If you use any online service that charges payments on your behalf you are good going forward. Effective Jan. 1, 2019, all online lodging marketplaces (OLM) are required to register to file and pay taxes on all online lodging transactions. For other kinds of rental managers (real estate agent, management company, etc), they are required to collect the taxes on your behalf. If you are unsure, contact the company.

Exempt Rental Activity – Do not submit taxes

• Airbnb
• Booking.com
• Other OLM sites that charge guest on your behalf
• Management companies
• Real Estate professional managers

What if you obtain rentals on your own and you charge the guest directly? Then you would need to charge the guest the taxes. Also, you would need to register and submit the payments to the state as well as any city/county that requires it. These are the situations where this might occur:

• The guest is a friend.
• A guest rented your property from an ad.
• Some guests rented your property from an online site that charges only subscription fees for your listing.
• Guest rented the property from your own website.

How Do I Register My Property?

If you have determined that you need to file taxes on your own, setup your own tax account. You do not need to register your property per se, you need to create an account to file its taxes.

Create an account at the Arizona Taxes Website. Good news, the state will properly file your taxes that are required by the state, county and city. In fact, the only way to pay the local jurisdictions is by using the state website.

The state registration is not tied to the property but the taxpayer and property locations. This means that if you have multiple properties you may combine the tax payments together if you can.

How Do I Pay?

The same website where you register is where you can submit your payments:

Arizona Taxes Website

Before you can submit your payments, register as explained above. You will need to enter transactions by locality. If you own property in multiple towns and rent them out, collect appropriate business codes for each locality.

Complete information about the business codes required for your TPT is available at the Arizona Model City Tax Code site. Use the most up to date tax rate table available by date.

Here’s an example using the table for the city of Avondale.

City: Avondale located in the county of Maricopa

• [ Business Code 25 ]: Combined Maricopa/State tax rate (Transient Lodging): 7.27%
• [ Business Codes 44/144] Avondale tax rate (Hotel/Hotel-Motel): 4.5%
• Total Tax Rate: 11.77%

The filing of these taxes follows state business tax rules. Generally, you will want to file your tax payments quarterly. This is as you would for other business income that require estimated tax payments.

Cities That Require Registration

Individual cities do not require registration and do not collect taxes on their own. The state handles this task on their behalf.

Counties That Have Their Own Taxes

Most counties in Arizona assess their own tax rate for lodgings. The county would charge a separate Transient Lodging Tax. Use the following link for more information: Arizona Model City Tax Code. Use the most up to date tax rate table available by date.

Cities That Have Their Own Taxes

Most cities in Arizona assess their own tax rate for lodgings. Cities typically charge one of the following tax combinations:

• Hotel Tax
• Hotel Tax + Hotel Motel Tax
• Hotel Tax + Bed Tax

Use the following link for more information: Arizona Model City Tax Code. Use the most up to date tax rate table available by date.

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