Across Arizona, renters are receiving notices advising them of the savings they will see thanks to a law passed by Republicans in the Legislature that has made the collection of sales tax on long-term housing illegal.
The new law takes effect in January of 2025.
More people are receiving notice that their rent will be going down. pic.twitter.com/VFm3Y9t2h2
— Warren Petersen (@votewarren) November 27, 2024
Critics say that cities have been relying on increasing rental tax rates to grow government rather than increase public safety services.
Many city leaders, during this last election cycle, claimed that they have not raised property taxes, while they were raising regressive rental taxes.
At the time the law was being passed, most city leaders decried it. Fountain Hills Councilman Allen Skillicorn supported an immediate ban saying, “The truth is increasing our population will have a far greater impact on our economy and our community’s tax revenue than the funds we receive from the tax on long-term rentals. Eliminating this tax early will give our community an edge in competing with other communities for new residents, new businesses, and new opportunities.”
According to the Arizona Department of Revenue, starting January 1, 2025, residential rental property owners should no longer collect and remit any city transaction privilege tax (TPT) on the income derived from long-term lodging stays of 30 days or more to ADOR. (Laws 2023, Chapter 204 and A.R.S. § 42-6004 (H)).
The law applies to licensees that are registered and have filed using business code 045 indicating that license is engaged in the business classification of residential rental. Residential rental is the rental of real property for a period of 30 or more consecutive days for residential (i.e. noncommercial) purposes only.
Currently, there is no state or county tax imposed on residential rentals, and the upcoming change to the tax law will eliminate the city TPT. While there will no longer be a city TPT obligation beginning January 1, 2025, property owners must still register the property with the county assessor to comply with landlord tenant laws and other compliance requirements from government entities.
