Phoenix, Arizona Sales Tax 2026

Phoenix, Arizona: home to the iconic Desert Botanical Garden, Camelback Mountain, and a booming tech and aerospace scene is a vibrant place to start or grow a business.

In general, businesses in Arizona must collect Transaction Privilege Tax (TPT) if they have a sales tax nexus and make taxable sales within the state.

As a result, this requirement applies whether your business operates a physical location in Phoenix or sells remotely to Arizona customers after nexus has been established.

A sales tax nexus is created based on your business’s significant presence in a state. In most cases, two types of sales tax nexus determine your business’s presence in a state: physical nexus and economic nexus.

Physical Nexus

A physical nexus means having a significant physical presence or engaging in enough activities within a state to require the collection and payment of sales tax. In practice, the factors that determine a physical nexus in Arizona include the following:

1. Physical Location: This includes having an office, a place for distribution, sales, or showcasing products, a warehouse or storage facility, or any other place where you conduct business. This includes ownership or lease of real or personal property in Arizona.
2. Inventory in the State: This covers situations where you store your products within the state, even if it’s done through a third-party fulfillment center or 3PL (like Amazon FBA) or an online marketplace.
3. Employees, independent contractors, agents, or other representatives operating on your behalf.
4. Delivery of merchandise into Arizona on vehicles owned or leased by the taxpayer.
5. Ownership or lease of real or personal property in Arizona.

To stay informed about the current criteria for establishing a physical sales tax nexus in Arizona, take a look at the official regulations available right here! 

Economic Nexus

States have established regulations to collect sales tax from out-of-state sellers who meet certain revenue and/or transaction thresholds. This rule is known as economic nexus. As of 2021, the economic nexus threshold in Arizona is $100,000 in gross revenue from sales made during the previous or current calendar year.

Graduated Thresholds: In 2019, the threshold was $200,000. In 2020, it was revised to $150,000. From Jan 1, 2021 onward, the threshold has been set at $100,000. Although the nexus criteria outlined above apply to most businesses, additional methods may also establish economic sales tax nexus in Arizona. To access a comprehensive list of these rules, please refer to the governing laws for economic sales tax nexus requirements in Arizona.

Every state has different rules when it comes to the taxability of goods and services. In Phoenix, Arizona, there is a variety of goods that are subject to sales tax and a few that are exempt.

For quick reference, check the table below:

PRODUCT	TAXABLE	EXEMPT
Tangible Products	Clothing Jewelry Furniture Cosmetics Electronics Textbooks Home Goods	Groceries Feminine Hygiene Products Diapers  Prescription Medications  Medical Devices  Agricultural Supplies
Services	All service-based transactions are generally not taxable in Arizona.	Advertising Services Professional Services  Cleaning Services
SaaS	SaaS and Digital Products are currently taxable in Arizona.
Digital Products	SaaS and Digital Products are currently taxable in Arizona.
Shipping and Handling	Shipping and Handling charges are generally not taxable in Phoenix, Arizona.	Shipping and Handling charges in Phoenix, Arizona, are non-taxable if the following conditions are met:  The goods are separately listed on the invoice or contract If listed separately, the seller must provide pickup or free delivery options that allow the buyer to opt out of shipping and handling charges

        For in-depth guidance on taxabilities and exemptions on goods and services, read our The Ultimate Business Guide to Sales Tax in Arizona.

Once you’ve established a sales tax nexus in Phoenix, Arizona, your next step is making sure you stay compliant by registering your business for a sales tax permit, also known as a seller’s permit or a business license in other states.

To get a sales tax permit in Phoenix, follow these steps carefully:

• Step 1: Create a user profile at AZTaxes.gov
• Step 2: Fill out the following documents and details.
• Step 3: Print and sign the completed JT-1 Form, attach the necessary documents and payment, and mail it to the address provided on the form or the state’s website.
• Step 4: If you need more help, you can also check our step-by-step guide.

Once you receive your Arizona sales tax permit, you must keep it displayed at all times at your business’s physical locations. Arizona sales tax permit needs to be renewed annually based on the region or location where the business operates.

After registering your business in Phoenix, Arizona, the next step is to file and remit your sales tax returns on time to remain compliant. But before filing your sales tax returns, you must know the filing schedule assigned to you by the state.

To get started, follow this step-by-step guide to filing and remitting your Arizona sales tax returns:

• Step 1: Visit the Arizona Department of Revenue Business User Login page.
• Step 2: Log in using your username and password.
• Step 3: Complete identity verification if prompted using the OTP sent to your email or phone.
• Step 4: Prepare your sales tax data, such as a Shopify tax report or ecommerce sales summary.
• Step 5: From the dashboard, click Account Details for the tax account you are filing.
• Step 6: Select the tax type from the left-hand menu.
• Step 7: Choose the correct license number and filing period.
• Step 8: Enter gross sales for each location listed in your report.
• Step 9: Apply any eligible deductions and continue.
• Step 10: Enter excess tax collected, if applicable.
• Step 11: Review all information carefully for accuracy.
• Step 12: Enter your license PIN, accept the disclaimer, and submit the return.
• Step 13: Click Make a Payment and proceed to the payment screen.
• Step 14: Enter payment details and confirm the transaction.
• Step 15: Save the confirmation page for your records, preferably in cloud storage such as Google Drive.

NOTE: Late filings result in penalties and fees. In Arizona, paying your sales tax on time earns you a 1% discount up to $10,000 annually. Additionally, filing online gives an extra 1.2% discount, capped at $12,000 a year. However, these discounts don’t apply to local TPT.

If you make retail sales in Arizona subject to the state sales tax from a business located in a taxing district, district sales tax is generally due on your sales of tangible personal property. In Arizona, districts have varying sales tax rates. Some areas impose combined state, county, and city fees.

As a result, out-of-state retailers making taxable transactions to customers in the area are required to collect and remit the combined tax rate based on the destination of the goods. To help you identify the correct rates in any city, you may look up the rate by address and ZIP code in our calculator.

85008, 85012, 85014, 85015, 85022, 85029, 85032, 85033, 85035, 85041

1. Why is Phoenix sales tax so high?

Phoenix’s sales tax appears high because Arizona uses a Transaction Privilege Tax (TPT) system that combines multiple layers of tax. The total rate includes the state tax, Maricopa County tax, Phoenix city tax, and any applicable special district taxes.

These combined rates help fund public services such as infrastructure, transportation, and city operations, resulting in a higher overall rate compared to areas with fewer tax layers.

2. What items are not taxed in Arizona?

In general, Arizona does not tax many professional or personal services, along with certain transactions that are specifically exempt under state law. Common non-taxable items include most medical services, educational services, and many financial services.

Taxability can vary by business classification, so sellers should review Arizona’s tax codes carefully.

3. Does Arizona charge tax on groceries?

At the state level, Arizona does not tax groceries; however, some cities impose a local tax on food for home consumption. The taxability of groceries depends on the city where the sale occurs. In Phoenix, groceries may still be subject to city-level tax, so businesses must apply the correct local rate.