Official Web Site of the City of Phoenix

Selected Corporate Tax Summary

Arizona offers a favorable tax environment for existing businesses and for those moving into the state. Arizona follows the federal laws for accelerated depreciation and the depreciation expense election. Subtractions from federal income are allowed for such items as dividends received from corporations doing 50 percent or more business in Arizona and interest received on U.S. obligations. Numerous credits are allowed against tax including the Research and Development Credit, the Enterprise Zone Credit, the Pollution Control Credit, the Alternative Fuel Credit and the Summer School and Jobs Credit. The table below is provided for comparison purposes.

Selected Corporate Tax Summary

Type of Tax	Arizona	California	Colorado	Texas	Illinois	Georgia
Income Tax
Highest marginal rate	7.96%	8.84%	4.75%	N/A	4.8%	6.0%
Alternative minimum tax rate	No	7.0%	No	N/A	No	No
Adjustment to federal income for depreciation	No	Yes	No	N/A	No	No
State tax deduction	Yes (Arizona only)	No	Yes (except Colorado)	N/A	Yes (except Illinois)	Yes (Georgia only)
Net operating loss carryover	5 years 0 back	5 years (50% of NOL) 0 back	15 years 0 back	N/A	15 years 3 back	15 years 3 back
Allocation/Apportion Does state adopt UDITPA?	Yes	Yes	Yes	N/A	Yes	No
Consolidated returns	Yes	Yes	Yes	N/A	Yes	Yes
Local/City income taxes	None	None	None	None	None	None
R & D credit	Yes	Yes	No	N/A	Yes	No
Franchise tax
Required filing	No	No	No	Yes	Yes	Yes
Frequency for filing	N/A	N/A	N/A	Annual	Annual	Annual
Basis of tax	N/A	N/A	N/A	Capital and surplus	Paid-in capital	Corporate net worth
Rate of tax	N/A	N/A	N/A	.25% per year of net taxable capital - plus 4.5% of net earned surplus	0.1% of paid- in capital	Graduated, maximum $10,000
Property Taxes
Assessment ratio	25%	100%	29%	100%	33.3%	40%
Taxation of inventories	Exempt	Exempt	Exempt	Yes	Exempt	Exempt
Sales/Use tax
State	5.0%	6.0%	3.0%	6.25%	6.25%	4.0%
County/City	2.00%	2.25%	3.5%	2.0%	1.25%	2.0%

1999

Arizona Tax Rates

Corporate income tax
Rate: 7.96 percent

• Arizona's income tax code is patterned after the federal Internal Revenue Code.
• After January 1, 2001, the rate will drop to 6.96 percent.

Sales tax

State rate:	5.00%
County rate:	.70%
City rate (Phoenix):	1.40%
	7.10%	Sales tax

• No state sales tax on machinery and equipment used for manufacturing and R&D.
• No state sales tax on commercial leases.

Real Property Tax
Rate: Varies by school district; the average rate is $16.95 per $100 of assessed evaluation.
Commercial and industrial property is assessed at 25% of full cash value.
Residential property is assessed at 10% of full cash value.

Example:	$1,000,000	Full cash value
	x 25%	Assessment ratio
	$ 250,000	Assessed value
	÷ 100	(Rate per $100)
	$2,500
	x 16.95	(Average tax rate)
	$42,375	Tax

• State portion on property taxes eliminated as of January 1997.

Personal Property Tax
Rate: same as real property.
No tax during construction work in progress.
Accelerated Depreciation Schedule for commercial and industrial property.

Year 1	40% of scheduled depreciated value
Year 2	56%      "      "      "
Year 3	72%     "      "      "
Year 4	88%     "      "      "
Year 5 beyond	Scheduled depreciated value

Workers Compensation
Rate: 4% of payroll (average rate).
Rate depends on job classifications and employer history.
Companies may be self-insured, state-fund insured or third party insured.

Unemployment insurance
Rate: 2.7% on first $7,000 of wages (average rate after experience is 1.5%).

Arizona Personal Income Tax Tax rates and exemptions
A personal income tax is levied on residents and nonresidents earning income in Arizona.

Single and married taxpayers filling separate returns

Taxable income:

Single	Married	1999 rate
First $10,000	First $20,000	2.87%
Next $15,000	Next $30,000	3.20%
Next $25,000	Next $50,000	3.74%
Next $100,000		Next $200,000
4.74%
Amount over $150,000	Amount over $300,000	5.04%

Personal exemptions

Single	$2,100
Married	$4,200
Head of household	$4,200
Dependents	$2,300

Source: Arizona Department of Revenue, 1999

Back to Top	Phoenix Overview	Labor Force	Selected Corporate Tax Summary
Labor Force	Infrastructure	Quality of Life	Assistance Programs

The city of Phoenix provides accessibility to information, participation, services and employment for persons with disabilities. This guide may be made available in the following alternative formats: large print, braille or audio-tape by calling (602) 534-CITY (2489).