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Area Development - Site Selection, Facility Planning and Workforce Development

Arizona Basic Business Taxes 2012

Arizona's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include no corporate franchise tax, no business inventory tax, no income tax on dividends from out-of-state subsidiaries, and no worldwide unitary tax.

2012
Corporate income tax:
Net income is taxed at a rate of 6.968 percent (will be phased down to 4.9% by 2017). However, in 2005 Arizona adopted a super-weighted sales factor apportionment formula that allows multi-state companies doing business in Arizona to substantially reduce their state income tax liability.

Transaction privilege and use taxes:
The tax commonly referred to as a "sales tax" is in reality two distinct taxes. The 6.6 percent transaction privilege tax is measured by the value of tangible personal property sold by the vendor in Arizona. The 6.6 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.

Property tax:
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 2017. Property is valued in the county where located. Secured and unsecured personal property under $57,632 dollars in value and construction work in progress are 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 five subsequent years; machinery and equipment used directly in the manufacturing process, the production and transmission of electricity, or drilling for oil and gas are exempt from transaction privilege tax.

Arizona State Contact:
Business Development Division
Arizona Commerce Authority
333 N. Central Ave. Suite 1900
Phoenix, AZ 85004
(800) 542-5684

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.

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