Arizona Business Taxes Explained: Flat Income Tax and TPT
Arizona's flat 2.5% personal income tax, 4.9% corporate tax and transaction privilege tax (TPT), explained for non-resident business owners, with what usually applies to companies run from abroad.
Arizona's tax system is simpler than many states'. It has a flat personal income tax, a flat corporate tax, and a sales-type tax called TPT that works a little differently from other states. For a foreign-owned LLC run from abroad, most of it never applies. Here is the overview, so you know what to watch as your business grows.
Personal income tax: flat 2.5%
Arizona taxes individual income at a single flat rate of 2.5%, one of the lowest flat rates in the USA.
For a non-resident owner of a pass-through LLC (single-member or partnership), Arizona tax generally applies only to income from Arizona sources, such as business physically conducted in Arizona, Arizona property or Arizona-based staff. An LLC formed in Arizona but run entirely from abroad, with no Arizona activity, usually has no Arizona-source income.
Corporate income tax: 4.9%
Companies taxed as C-Corporations that do business in Arizona pay a flat 4.9% on Arizona taxable income, apportioned based on their Arizona activity. A minimum tax applies, and corporations file an Arizona return each year. See Arizona corporation for non-residents.
Transaction privilege tax (TPT)
Arizona doesn't have a traditional sales tax. It has a transaction privilege tax, which is a tax on the seller for the privilege of doing business in Arizona. In practice, most businesses pass it on to customers like a sales tax.
- Who needs a TPT licence: businesses selling taxable goods or services in Arizona, including remote sellers whose Arizona sales exceed the economic nexus threshold ($100,000 in annual Arizona gross sales).
- Rates: a state rate plus county and city rates, varying by location and business classification.
- Marketplaces: marketplace facilitators such as Amazon collect and remit TPT on sales through their platforms.
- Returns: filed monthly, quarterly or annually depending on volume.
See US sales tax for online sellers and Arizona LLC for e-commerce sellers.
No franchise tax, no annual report fee for LLCs
Arizona LLCs pay no franchise tax and file no annual report. See why Arizona LLCs don't file an annual report.
Property and payroll taxes
If you have premises, equipment or staff in Arizona, property taxes and payroll obligations (withholding and unemployment insurance) apply. See hiring in the USA.
What usually applies to a company run from abroad
| Tax | Typical foreign-owned LLC with no Arizona activity |
|---|---|
| Personal income tax (2.5%) | Usually not, no Arizona-source income |
| Corporate income tax (4.9%) | N/A for LLCs (unless taxed as a corporation) |
| TPT | Only if selling taxable items into Arizona above the threshold |
| Franchise tax | None |
| Annual report fee | None |
Federal taxes are separate
Arizona's rules sit on top of federal ones. A foreign-owned single-member LLC files Form 5472 with a pro forma 1120 every year. See Form 5472 explained and the US federal tax overview.
How UCB helps
We tell you which Arizona taxes apply to your business, register for TPT when needed, and handle your federal filings through our US tax filing service. See the Arizona company formation page.
Questions about Arizona taxes for your business? WhatsApp us at +91 8105 199 399 or email info@ucbsolutions.com.
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This article is general information for non-resident business owners and is not legal or tax advice. Rules and fees change; contact us to confirm what applies to your situation.
