- What is Arizona's Transaction Privilege Tax (TPT) on short-term rentals?
- What are the combined TPT rates in Phoenix, Scottsdale, and Sedona?
- Does Arizona's preemption law prevent cities from regulating STRs?
- Does Airbnb collect Arizona TPT automatically?
- What are Arizona's STR registration requirements?
- What is Arizona's state income tax rate on rental income?
State-level registration and permitting — TPT license required, preemption protects hosts
Arizona requires STR hosts to obtain a TPT (Transaction Privilege Tax) license from the Arizona Dept of Revenue (ADOR) before their first rental. Register at AZTaxes.gov. Arizona requires a separate TPT license for each rental property — if you own multiple STRs, each property gets its own license. The TPT license number must be provided to the booking platform and displayed in your listings as required by ADOR and by platform compliance requirements.
Arizona's ARS §9-500.39 preemption statute is what distinguishes Arizona from most other states. This law prohibits Arizona cities and towns from: (1) banning STRs based on their classification as a short-term rental, (2) requiring an STR-specific license as a condition of operating beyond the state TPT license, and (3) imposing standards stricter than those for owner-occupied residential uses. The 2022 amendments to this statute gave cities somewhat more authority — they may now require: registration/notification of STR operations (not a fee-based license), designation of an emergency contact person who can respond within 60 minutes, safety inspections under residential standards, and compliance with noise and nuisance ordinances. Phoenix requires STR notification/registration with a 60-minute emergency contact requirement. Scottsdale — one of Arizona's largest STR markets — requires STR registration. Tucson requires registration and TPT compliance. Sedona has local registration and TPT requirements and has pushed hard for more local authority over STRs, though the preemption law currently constrains that effort.
Arizona's preemption law is one of the strongest STR-protective statutes in the country. Cities cannot effectively ban or price-out STRs through excessive licensing fees. This is why Arizona — particularly Scottsdale, Sedona, and the Phoenix metro — is one of the country's most active STR markets.
State-level taxes — 5.5% TPT and 2.5% flat income tax
Arizona's Transaction Privilege Tax (TPT) is the state's equivalent of sales tax — it's technically a tax on the privilege of doing business in Arizona rather than a tax on the buyer. For short-term rental hosts, TPT applies to gross rental income from transient lodging (stays under 30 days in most cases). The state TPT rate is 5.5% for transient lodging (verify the current rate with ADOR at AZTaxes.gov, as it has changed in prior years). Cities impose their own TPT on top — city rates range from approximately 1.5% to 3.5% depending on the municipality. Combined state plus city rates typically run 7–12% across Arizona markets. A key advantage of Arizona's system is that both state and most city TPT are filed together through the centralized AZTaxes.gov system in a single combined return.
For income tax, Arizona has a flat 2.5% state income tax rate effective for tax year 2023 and beyond (reduced from graduated rates under Prop 132 and SB1828 — one of the lowest flat income tax rates in the country). Rental income from Arizona STRs is taxable in Arizona — report on AZ Form 140 (or Form 140NR for non-residents with Arizona source income). Arizona broadly follows federal rental income treatment, so Schedule E passive income from your federal return flows to Arizona. Arizona has no state equivalent of the federal self-employment tax.
Arizona's 2.5% flat income tax rate (effective 2023) is one of the lowest in the country for states that have an income tax. Combined with moderate TPT rates, Arizona's overall tax burden on STR income is relatively modest.
Common city and county taxes — TPT rates across Arizona's major STR markets
Arizona's combined TPT system means that both state and city rates are collected together and filed in a single return through AZTaxes.gov — a significant administrative simplification compared to states where state and local taxes are filed separately. The total rate a guest pays depends on the state 5.5% plus the applicable city rate. Sedona, which has a larger tourism economy relative to its size, has one of the higher city rates in the state at 3.5%. Unincorporated Maricopa County areas outside city limits pay only the state 5.5% with no city layer.
| City | AZ State TPT | City TPT | Combined (approx) |
|---|---|---|---|
| Phoenix | 5.5% | 2.3% | ~12.57%* |
| Scottsdale | 5.5% | 1.75% | ~12.05%* |
| Tucson | 5.5% | 2.0% | ~11.5%* |
| Sedona | 5.5% | 3.5% | ~13%+ |
| Flagstaff | 5.5% | 2.281% | ~12% |
| Tempe | 5.5% | 1.8% | ~11.8% |
| Mesa | 5.5% | 2.0% | ~12% |
| Maricopa County (unincorp.) | 5.5% | N/A | ~5.5% |
*Note: Arizona may also apply county excise tax in some jurisdictions — combined rates may be slightly higher than shown. Verify current rates for your specific property at AZTaxes.gov. Some Arizona cities are NOT in the centralized TPT program and require separate city-level filings — confirm whether your city participates at AZTaxes.gov before assuming the combined state return covers your city obligation.
Some Arizona cities are NOT in the centralized TPT program and require separate city-level filings. Verify whether your city participates at AZTaxes.gov before assuming the combined return covers everything.
What Airbnb and Vrbo collect automatically in Arizona
Airbnb collects and remits Arizona state TPT and city TPT for most Arizona markets through the AZTaxes.gov centralized system. Arizona is well-covered by Airbnb's collection agreements — the centralized system makes broad coverage more practical than in states with fragmented local tax systems. Most major Arizona cities participate in the centralized system, so Airbnb's collection typically covers both state and city layers in a single integrated process. In 2023–2024, Airbnb updated its AZTaxes.gov integration to cover additional Arizona cities. Vrbo also collects Arizona TPT in most markets — verify current coverage on Vrbo's help page.
Even when Airbnb or Vrbo collects all applicable TPT, you must maintain an active Arizona TPT license. ADOR can contact you directly and require return filings even for periods where a platform collected on your behalf. Platforms may also require your TPT license number to be on file with your listing — ensure it's associated with your account. Direct bookings are fully the host's responsibility for both state and city TPT collection and remittance.
Not sure where your Arizona rental stands?
Answer 8 questions and get a personalized breakdown of your tax situation — free.
Check my rental tax situation — free →Filing schedule and where to file
Arizona TPT: file monthly if annual tax exceeds $2,400, quarterly if $400–$2,400 annual, or annually if under $400. File through AZTaxes.gov — the single portal covers both state and most participating city TPT in one return. Returns are due on the last day of the month following the reporting period. Arizona income tax (AZ Form 140): annual, due April 15 (or October 15 with extension). Rental income from Schedule E carries to AZ Form 140. Non-residents with Arizona source income file AZ Form 140NR. Some Arizona counties have additional excise tax obligations separate from the state/city TPT system — verify at your county assessor's website.
STR notification/registration renewal is required annually in most Arizona cities. Renewal deadlines vary by city — Phoenix and Scottsdale typically tie renewals to an annual calendar. Keep your emergency contact information current as part of your renewal process; outdated contact information is one of the most common compliance issues flagged in city audits. If you add a new property, obtain a new TPT license for that property before the first booking — the license is property-specific, not account-wide.
Penalties for non-compliance
Arizona TPT non-payment: penalty of 0.5% per month of unpaid tax (maximum 25%) plus interest at ADOR's prevailing annual rate (approximately 3% per year as of 2024 — verify current rate). Willful non-filing triggers additional penalties. Hosting without a TPT license when required is a violation of Arizona tax law, and ADOR can suspend your ability to conduct business in Arizona. The centralized AZTaxes.gov system makes TPT compliance straightforward — ADOR can easily identify registered properties that are not filing, so non-compliance is more visible than in states without centralized systems.
Under ARS §9-500.39, cities cannot issue traditional STR bans, but they can revoke the right to operate for repeated nuisance violations — multiple sustained noise complaints, police calls, or property management failures can result in a city stripping your operating rights even under the preemption framework. Airbnb and Vrbo may require TPT license numbers and can delist listings that lack valid license information. Failure to designate and maintain an accessible emergency contact is one of the most common grounds for city-level enforcement action.
Recent rule changes — 2024–2026
Arizona SB 1367 / ARS §9-500.39 amendments (2022): Updated Arizona's preemption law to give cities somewhat more regulatory authority — specifically allowing emergency contact requirements, registration/notification requirements, and health/safety inspections at residential standards. The fundamental prohibition on banning STRs remains, but cities now have a middle-ground toolkit they lacked before 2022. Arizona income tax reduction to 2.5% flat rate (effective 2023): Under Prop 132 and SB1828, Arizona reduced its income tax to a flat 2.5% for all taxpayers — one of the most significant state income tax reductions of the past decade. This directly benefits STR investors with higher rental incomes.
Scottsdale and Sedona STR growth (2023–2025): Both markets continued rapid STR expansion. Sedona has been the most vocal Arizona city lobbying for expanded local authority to restrict STRs due to neighborhood and housing concerns — Sedona's situation as a small tourism-dependent city with limited housing supply makes STR regulation particularly contentious there. Watch for potential legislative changes in the 2025–2026 Arizona sessions that could adjust the preemption framework. Airbnb Arizona TPT integration expanded (2023–2024): Airbnb updated its AZTaxes.gov integration to cover additional Arizona cities in the centralized system.
Sedona and other tourism-heavy Arizona cities have been the most vocal advocates for expanding local STR authority. Arizona's preemption law is a current source of ongoing political tension — monitor for potential legislative changes in 2025–2026 sessions.
Frequently asked questions
What is Arizona's Transaction Privilege Tax (TPT) on short-term rentals?
Arizona's TPT is the state's version of sales tax. For short-term rental income (transient lodging), the state TPT rate is 5.5%. Cities add their own TPT on top — Phoenix's city rate is 2.3%, Scottsdale's is 1.75%, and Sedona's is 3.5%. Combined rates typically run 11–13% depending on the city. You must obtain a TPT license from the Arizona Dept of Revenue (AZTaxes.gov) for each rental property before your first booking.
Does Arizona's preemption law prevent cities from banning STRs?
Yes. Arizona's ARS §9-500.39 prohibits cities and towns from banning short-term rentals or imposing STR-specific licensing requirements. Cities may still require notification/registration (not a fee-based license), mandate a 24/7 emergency contact, enforce noise and nuisance ordinances, and apply residential health and safety standards. The fundamental prohibition on outright STR bans remains in place, making Arizona one of the most host-friendly regulatory states in the country.
Does Airbnb collect Arizona TPT automatically?
Yes, in most Arizona markets. Airbnb collects and remits both state (5.5%) and city TPT through Arizona's centralized AZTaxes.gov filing system. Most major Arizona cities participate in the centralized system, making Airbnb's coverage comprehensive. You still need to maintain an active Arizona TPT license — ADOR may require you to file returns even for periods when Airbnb collected on your behalf.
What is Arizona's income tax rate on rental income?
Arizona has a flat 2.5% state income tax rate effective for tax year 2023 and beyond (reduced from graduated rates under Prop 132/SB1828). All rental income — whether passive Schedule E or active Schedule C — is taxed at this flat 2.5% rate on your Arizona Form 140. Arizona broadly follows federal rental income treatment, so Schedule E passive income from federal returns carries through to Arizona.
What STR registrations does Arizona require?
At the state level: an Arizona TPT license from ADOR (AZTaxes.gov) for each rental property — required before your first booking. At the city level: most Arizona cities participating in the ARS §9-500.39 framework require registration/notification (but not a fee-based license) and designation of an emergency contact who can respond to issues within 60 minutes. Phoenix, Scottsdale, Tucson, and Flagstaff all have notification/registration requirements. Verify your specific city's current requirements.
Know exactly where your rental stands
Our free checker looks at your income, days rented, and property type — then tells you exactly what you owe and what to do next.
Check my rental situation — free →