AZ
Arizona Small Business Tax Guide
Arizona transaction privilege tax rate, license and filing dates from the Arizona Revised Statutes, the corporate rate from a 2026 ADOR booklet, and federal points, each with its source and date. General information only, not tax advice.
Disclaimer: This page is educational content only. Tax laws change, and your situation may differ. It is not legal, tax, or financial advice. Consult a qualified professional licensed in Arizona before making filing or planning decisions.
Tax landscape for small businesses
Each Arizona fact below is quoted from the Arizona Revised Statutes or the Arizona Department of Revenue (ADOR), with the source and its date. The Legislature says its online version "reflects the version of law that is effective on January 1st of the year following the most recent legislative session", so check ADOR for the law that applies to your period.
Transaction privilege tax (TPT): section 42-5010 (Arizona Revised Statutes, the Legislature's online version, as retrieved on October 31, 2026) sets "Five percent of the tax base" for the business classifications in its subsection A, paragraph 1, which include "(l) Retail classification". Section 42-5010.01 (Arizona Revised Statutes, the Legislature's online version, as retrieved on October 31, 2026) adds an increment "From and after June 30, 2021 through June 30, 2041" at "six-tenths of one percent of the tax base" for those same classifications. Other classifications in section 42-5010 have different rates.
Worked example (sample figures, state rates only): on a $1,000.00 tax base in the retail classification, 5% is $50.00 and the 0.6% increment is $6.00 (both rates from the Arizona Revised Statutes, the Legislature's online version, as retrieved on October 31, 2026), so the state TPT is $56.00. This page doesn't list county or city tax; ask ADOR whether one applies where you do business.
Federal rules apply as well. The IRS estimated taxes page (In the US (federal), last reviewed or updated September 25, 2026) says "If you are in business for yourself, you generally need to make estimated tax payments."
Tax overview
Each row lists a tax area and its notes. Confirm current figures with your state's tax agency or the IRS.
| Tax type | Rate or basis | Notes |
|---|---|---|
| Arizona TPT, retail and the other paragraph 1 classifications | "Five percent" plus "six-tenths of one percent" | Arizona Revised Statutes (the Legislature's online version, as retrieved on October 31, 2026), section 42-5010, subsection A, paragraph 1: "Five percent of the tax base as computed for the business of every person engaging or continuing in this state in the following business classifications", which include "(l) Retail classification". Section 42-5010.01: "From and after June 30, 2021 through June 30, 2041, in addition to the rates prescribed by section 42-5010, subsection A, an additional rate increment is imposed and shall be collected." The increment is "six-tenths of one percent of the tax base" for the paragraph 1 classifications. This page doesn't list county or city tax; ask ADOR whether one applies where you do business. |
| Arizona corporate income tax | "4.9%" | ADOR's 2026 Form 120ES/165ES estimated payment booklet says "C Corporations, S Corporations subject to tax at the federal level, and exempt organizations with UBTI, multiply columns (a) through (d) of line 8 by the corporate tax rate, 4.9%." That's the rate in a 2026 estimated payment booklet; check ADOR for your tax year. |
| Arizona PTE election (partnerships and S corporations) | "2.5%" | The same booklet says "Partnerships and S Corporations making the PTE election, multiply columns (a) through (d) of line 8 by the PTE tax rate, 2.5%." It's an elective entity-level rate, kept separate from the corporate rate and from individual income tax. |
| Individual income tax | Not listed here | This guide doesn't quote an Arizona individual income tax rate. Ask ADOR or a tax professional for the rate that applies to your year. |
| Federal self-employment tax | "12.4%" and "2.9%" | The IRS self-employment tax page (In the US (federal), last reviewed or updated October 30, 2026): "The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance)." |
Filing requirements
This list isn't a complete checklist for your business.
Arizona TPT license
Section 42-5005 (Arizona Revised Statutes, the Legislature's online version, as retrieved on October 31, 2026) says anyone receiving taxable gross proceeds or income "and who desires to engage or continue in business shall apply to the department for an annual transaction privilege tax license accompanied by a fee of $12." It adds "A person shall not engage or continue in business until the person has obtained a transaction privilege tax license." The license is "valid only for the calendar year in which it is issued, but it may be renewed for the following calendar year", and "There is no fee for the renewal of the transaction privilege tax license." With two or more locations or business names, you need a license "for each location or business name regardless of whether all locations or business names are reported on a consolidated return under a single transaction privilege tax license number."
City or town license
For business "within a city or town that imposes a municipal privilege tax", section 42-5005 says you "shall apply to the department of revenue for an annual municipal privilege tax license accompanied by a fee of up to $50, as established by ordinance of the city or town." That fee "does not apply to a marketplace facilitator or remote seller that is only required to obtain a transaction privilege tax license pursuant to section 42-5043."
Monthly TPT returns
Section 42-5014 (Arizona Revised Statutes, the Legislature's online version, as retrieved on October 31, 2026) says the taxes "Are due and payable monthly", "on or before the twentieth day of the month next succeeding the month in which the tax accrues." The due date is not the delinquency date. A payment is delinquent "For taxpayers that are required or elect to file and pay electronically in any month, if not received by the department on or before the last business day of the month", and for all other taxpayers "if not received by the department on or before the business day preceding the last business day of the month." The Legislature says its online version "reflects the version of law that is effective on January 1st of the year following the most recent legislative session", so check ADOR for the law that applies to your period.
Quarterly or annual TPT, when ADOR authorizes it
Section 42-5014 says ADOR "shall authorize the taxpayer to pay the taxes on a quarterly basis" when estimated annual liability "for taxes imposed or administered by this article or chapter 6 of this title is between $2,000 and $8,000", and on an annual basis when estimated annual liability "for taxes imposed by this article is less than $2,000". In the statute's own words, those taxes "are due and payable monthly" by "the twentieth day of the month next succeeding the quarter in which the tax accrues" (quarterly) or "the twentieth day of January next succeeding the year in which the tax accrues" (annual). The word "monthly" there is the statute's text, so ask ADOR how your schedule works. Quarterly payments are delinquent, for electronic filers, "if not received by the department on or before the last business day of the month" and, for other quarterly filers, by "the business day preceding the last business day of the month". For annual filers the cutoff is "the last business day of January" when filing electronically and "the business day preceding the last business day of January" otherwise.
Electronic filing and other exceptions
Section 42-5014 says that for taxable periods "beginning from and after December 31, 2020", a taxpayer with annual total tax liability "of $500 or more, based on the actual tax liability in the preceding calendar year", or one that can "reasonably anticipate that liability in the current year", "shall file the return required under this article using an electronic filing program established by the department". So must anyone "engaged in or conducting business in two or more locations or under two or more business names". A taxpayer can apply "for an annual waiver from the electronic filing requirement". ADOR "may require a taxpayer whose business is of a transient character to file the return and remit the taxes imposed by this article on a daily, a weekly or a transaction-by-transaction basis", and taxpayers with prior-year liability of "$4,100,000 or more in 2023 and each year thereafter" must "pay an estimated tax payment each June".
TPT deductions and exempt income
ADOR's general instructions for Form TPT-1 (ADOR 10872, revised April 2019; as retrieved on October 31, 2026) say "For most deductions or exempt income, the seller should retain appropriate documentation relating to the deductible or exempt income." They add "Common deductions include income from: sales for resale; labor or delivery charges for retail sales; sales of exempt manufacturing equipment; and exempt retail food sales." The instructions date from 2019, so confirm with ADOR that a deduction still applies to your sales.
Federal estimated tax
The IRS estimated taxes page (In the US (federal), last reviewed or updated September 25, 2026) says "If you are in business for yourself, you generally need to make estimated tax payments." It adds "Each period has a specific payment due date."
Federal records
The IRS recordkeeping page (In the US (federal), last reviewed or updated May 1, 2026) says "You must be able to prove certain elements of expenses to deduct them."
Deductions and write-offs
Confirm with your state how it treats each item.
- Health insurance while self-employed: the IRS self-employment tax page (In the US (federal), last reviewed or updated October 30, 2026) says "Under Section 2042 of the Small Business Jobs Act, a deduction, for income tax purposes, is allowed to self-employed individuals for the cost of health insurance."
- Car use for your business: the IRS standard mileage rates page (In the US (federal), last reviewed or updated July 28, 2026) lists "Self-employed and business: 76 cents/mile" for "2026 mileage rates (July 1 – Dec. 31)".
- Proving what you claim: the IRS recordkeeping page (In the US (federal), last reviewed or updated May 1, 2026) says "The responsibility to substantiate entries, deductions, and statements made on your tax returns is known as the burden of proof."
Practical tips
- Pay TPT by the twentieth-day due date in section 42-5014 rather than waiting for the later delinquency date.
- Renew your state TPT license for each calendar year, and license each location or business name.
- Chase late payers. Billed's invoice software page (checked October 31, 2026) says "Invoice reports show which invoices are paid, partially paid or past due, and you can see who owes you money and send them a payment reminder."
- Ask ADOR whether a city or town privilege tax applies where you do business.
Frequently asked questions
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At a glance
| Topic | What Arizona law, ADOR or the IRS says |
|---|---|
| State TPT, paragraph 1 classifications | "Five percent of the tax base" (A.R.S. 42-5010) plus "six-tenths of one percent of the tax base" "From and after June 30, 2021 through June 30, 2041" (A.R.S. 42-5010.01) |
| TPT license | "an annual transaction privilege tax license accompanied by a fee of $12" (A.R.S. 42-5005) |
| City or town license | "a fee of up to $50, as established by ordinance of the city or town" (A.R.S. 42-5005) |
| Monthly TPT due date | "on or before the twentieth day of the month next succeeding the month in which the tax accrues" (A.R.S. 42-5014) |
| Corporate income tax | "the corporate tax rate, 4.9%" (ADOR's 2026 Form 120ES/165ES estimated payment booklet) |
| Self-employment tax | "The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance)." (IRS, In the US (federal), last reviewed or updated October 30, 2026) |
Statutes as retrieved on October 31, 2026 from the Legislature's online version.
When this isn't for you
Meant for owners of small Arizona businesses who want each figure traced to a dated source. It leaves out county and city tax rates, individual income tax rates, use tax, payroll and audits; check those with ADOR or a tax professional.