City Property TaxNone
|State of Arizona||5.5%|
|City of Show Low||2%|
State Personal Income Tax
Tax Liability (% of net taxable income)
|$0 – $10,601||2.59%|
|$10,602 – $26,500||2.88%|
|$26,501 – $52,999||3.36%|
|$53,000 – $158,995||4.24%|
|$158,995 and above||4.54%|
State Corporate Income Tax
The corporate income tax rate is 4.9%. All non-air carrier taxpayers may select an apportionment ratio where the sales factor is weighted at 100% and the property and payroll factors are not included in the calculation. A multistate service provider may make a binding election to determine Arizona sales of services for purposes of the sales factor using a calculation based on 100% of the market sales. See Schedule MSP and the related instructions for more information including a definition of “multistate service provider.”
State Income Tax Withholding
Individuals who earn wages by performing services in Arizona are liable for Arizona income tax. Every employer who resides in Arizona and every non-resident employer who pays wages for services performed in Arizona must withhold Arizona income tax.
Arizona unemployment tax is paid on the first $7,000 in wages paid to each employee in a calendar year. The unemployment tax is used solely for Unemployment Insurance benefits. The actual taxes are calculated by multiplying the quarterly taxable wages by the tax rate. New employers are assigned a tax rate of 2% for a minimum of two calendar years. After that, employers may be eligible for a higher or lower tax rate depending on:
- Amount of taxes paid.
- Amount of unemployment benefits paid to former employees and charged to the employer.
- Average size of the annual taxable payroll.
- Overall solvency of the Trust Fund.
These four factors are used to compute the tax rate using a “reserve ratio” system—a cost accounting system. The taxes paid minus the amount of benefits attributable to the business are divided by the firm’s average annual taxable payroll to produce a reserve ratio. Therefore, the higher the reserve ratio, the lower the tax rates.
Arizona employers also pay an annual FUTA tax, which funds the administrative cost of the Unemployment Insurance program. The FUTA Tax is 6.2% on the 1st $7,000 in wages paid to each employee in a calendar year. When state taxes are paid on time, a tax credit of 5.4% is awarded to reduce the FUTA Tax. The credit is equal to the actual tax rate, plus the difference between that percentage and 5.4 %. This means that Arizona employers who pay their state taxes timely pay a net federal tax of 0.8%.
Arizona Worker’s Compensation is administered by the Industrial Commission of Arizona. It is compulsory and may be provided through a competitive state fund, a private insurance carrier, or employers may self-insure.