Corporate income tax:
Net income is taxed at a rate of 6.0 percent (will be phased down to 4.9% by 2017). Additionally, in 2011 Arizona enacted an electable 100% sales factor apportionment formula that will allow multi-state companies doing business in Arizona to substantially reduce their state income tax liability. The 100% sales factor will be phased in by 2017 (2013: 80%; 2014: 85%; 2015: 90%; 2016: 95%).
Transaction privilege and use taxes:
The tax commonly referred to as a "sales tax" is in reality two distinct taxes. The 5.6 percent transaction privilege tax is measured by the value of tangible personal property sold by the vendor in Arizona. The 5.6 percent use tax is a tax on any tangible personal property bought from an out-of-state vendor that is stored, used, or consumed in Arizona on which no tax was paid to the state of sale. Some counties and many municipalities impose a transaction privilege tax or use tax in addition to the state rate.
Real and personal property, unless specifically exempted, is subject to taxation. In 2011, Arizona put in place a property tax reduction program that will lower the current commercial property assessment ratio of 20 percent to 18 percent by 2016. Property is valued by the county in which the property is located. Arizona offers a personal property exemption on both secured and unsecured personal property up to a value of $146,973; construction work in progress is exempt. Business personal property qualifies for Arizona's Additional Depreciation for valuation purposes.
Other features of Arizona's tax code:
No corporate franchise tax; no business inventory tax; no income tax on dividends from out-of-state subsidiaries; no worldwide unitary tax; virtually all services exempted from sales tax; 100 percent of NOL may be carried forward for twenty subsequent years; machinery and equipment used directly in the manufacturing process or in R&D, the production and transmission of electricity, or drilling for oil and gas are exempt from sales tax; sales of electricity or natural gas to a for businesses that are principally engaged in manufacturing or smelting operations is exempt from sales tax.
Arizona State Contact:
Business Attraction Division
Arizona Commerce Authority
333 N. Central Ave. Suite 1900
Phoenix, AZ 85004
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings. This information was last updated October 2015.