Doing business in Phoenix: city taxes on top of state filings

The stack

• TPT is a privilege tax on the seller for taxable activities; register for a TPT license before selling.
• Phoenix’s city TPT rate is 2.8% for most activities; the combined rate with state and county is about 8.6%.
• Arizona LLCs file no annual report; corporations do.

Transaction privilege tax, not sales tax

Arizona’s transaction privilege tax is legally a tax on the seller for the privilege of doing business, though sellers usually pass it on. The state rate is 5.6% for retail and many other classifications; Phoenix added 2.8% after its council raised the city rate from 2.3% in 2025, and Maricopa County adds its share. Taxable classifications include retail, restaurants, commercial leasing, contracting, and more. One Arizona TPT license, issued by the Department of Revenue, covers state, county, and city.

Income taxes

Arizona taxes C-corporation income at 4.9% and personal income at a flat 2.5%, among the lowest rates in the West. There is no city income tax in Phoenix. Arizona LLCs don’t file annual reports with the Corporation Commission, which keeps ongoing entity costs low; corporations file an annual report.

Worked example

A Phoenix e-commerce LLC with $1 million of taxable retail sales to Phoenix customers remits about $86,000 of combined TPT (collected from customers), pays no entity-level income tax as a pass-through, and its owners pay 2.5% Arizona income tax on profit. A California-based company shipping to Arizona customers may owe TPT under Arizona’s economic nexus threshold without any Phoenix presence.

The state layer underneath

City taxes sit on top of state obligations, never instead of them. For the AZ side, see remote workers and nexus, and check whether a hire or customer in Phoenix creates a filing duty in the nexus checker.