Tax Law

Arizona Tax Law

Paying taxes in Arizona can be as much of a chore as figuring out which taxes apply to you. Which taxes must you pay for as a consumer and which are businesses responsible for? Arizona’s taxes can be especially challenging as some, like its sales tax, have different names and rules.

Whether you live in Phoenix, Tucson or Mesa, you’ll need to account for the various state and federal taxes in your budget, including everyday sales and grocery taxes. It can be easy to get lost in all of the taxes you’ll owe, so use the information in LawInfo’s Arizona tax law articles to become familiar with them and to avoid penalties.

Arizona Income Taxes

Arizona’s income tax calculation system is similar to those of states that use a progressive system in that it has a bracketed tax rate structure. However, unlike a progressive system, Arizona’s tax system doesn’t add a flat dollar amount on top of your tax rate to increase how much taxpayers with higher incomes must pay out.

Arizona’s income tax system uses five income brackets and rates with a simplified equation for determining how much you must pay for income taxes. You would multiply your taxable income by your bracket’s tax rate and then subtract a specific dollar amount to calculate your exact payment amount.

For example, say that your income in 2016 was $28,500. You’re in the third bracket at a tax rate of 3.36 percent. Multiply $28,500 by 0.0336 to get $957.60. In your bracket, you’d then subtract a flat dollar amount of $152 from $957.60 to get your final tax payment of $805.60.

Taxpayers who make less than $50,000 a year in taxable income can use Arizona’s Optional Tax Tables to determine exactly how much you need to pay.

Arizona Transaction Privilege and Use Taxes

In place of a state sales tax rate, Arizona has a transaction privilege tax (TPT). Sellers and lessors are ultimately responsible for paying the TPT but they may pass on the costs of the tax to customers. The TPT rate changes for different activities or products and each county and city combines their own TPT rate to the state rate.

The use tax rate is a part of the TPT. It is levied on goods or services used in Arizona for which the seller or vendor didn’t collect the TPT. The use tax must be paid by the person who uses the goods or services.

Arizona Luxury Taxes

Luxury taxes are levied on consumer products like alcohol and tobacco wherever these things are legalized in Arizona. They act as additional sales taxes (a.k.a. excise taxes) for products or services that are culturally perceived as vices. Luxury taxes are meant to dissuade consumers from purchasing or using the taxed products or services without making them illegal.

Arizona’s luxury tax rates include:

  • $0.029/cigarette.
  • $0.129/small cigars
  • $0.065/ounce of chewing, snuff, and fine cut tobacco products.
  • $3/gallon of spirituous liquors.
  • $4/gallon of wines with more than 24 percent alcoholic content.
  • $0.84/gallon of wines with less than 24 percent alcoholic content.
  • $0.16/gallon of beer.
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