Sales tax is a percentage of a purchase that goes to the city and state. It’s an important source of revenue that Scottsdale uses to fund essential services, like police and fire protection, road maintenance, and parks and recreation.
This article will give you a comprehensive overview of Scottsdale sales tax, whether you’re a business owner trying to stay compliant or a resident just trying to understand where your money goes.
We’ll cover the current Scottsdale sales tax rate, how it’s calculated, what’s exempt from sales tax, how to file and pay your taxes, and how Scottsdale’s sales tax compares to neighboring cities. By the end, you’ll have a solid understanding of how sales tax works in Scottsdale.
Understanding Scottsdale’s Transaction Privilege Tax (TPT)
When people talk about Scottsdale sales tax, they’re usually referring to the Transaction Privilege Tax, or TPT. This is a tax on businesses for the “privilege” of doing business in Arizona. It’s technically not a sales tax, which is levied on consumers. However, the effect is largely the same.
Businesses are responsible for collecting TPT from their customers and then sending it to the state government.
So, what counts as a taxable transaction in Scottsdale? Generally, it includes:
- Selling tangible personal property (stuff you can touch)
- Providing specific services, like contracting, running a restaurant, or retail sales.
Basically, if you’re selling goods or certain services in Scottsdale, you’re probably dealing with TPT.
Scottsdale Sales Tax Rates in 2024
As of 2024, Scottsdale’s combined sales tax rate is 7.35%. This is the total you pay when you buy most taxable goods and services.
This total is a combination of two separate taxes:
- Arizona State Sales Tax: 5.6%
- Scottsdale City Sales Tax: 1.75%
It’s worth noting that these rates are scheduled to change soon. Scottsdale voters approved Proposition 490, which will affect sales and use tax rates starting July 1, 2025. Keep an eye out for updates as that date approaches!
Future Scottsdale Sales Tax Changes: Proposition 490
Scottsdale voters recently approved Proposition 490, which will change the city’s sales tax rates.
Here’s what to expect, starting July 1, 2025:
- The combined sales tax rate for most business activities will be 8.00%.
- The transaction privilege (sales) tax rate will be 1.70%.
- The use tax rate will be 1.50%.
Keep these changes in mind as you plan for the future!
Scottsdale City Sales Tax vs. Arizona State Tax
It’s important to understand the difference between city and state sales taxes. The state sales tax is collected across Arizona and goes toward funding statewide programs. The city sales tax, on the other hand, is collected only within Scottsdale and funds city-specific services.
So, where does Scottsdale’s sales tax revenue go? Here’s a breakdown, according to the City of Scottsdale’s budget:
- Transportation: Almost 18% of privilege tax revenue and almost 7% of use tax revenue.
- McDowell Sonoran Preserve: Almost 9% of privilege tax revenue and 10% of use tax revenue.
- Parks and Recreation: Almost 9% of privilege tax revenue and 10% of use tax revenue.
- Public Safety: Almost 6% of privilege tax revenue and approximately 7% of use tax revenue.
Calculating Scottsdale Sales Tax
Calculating sales tax is pretty straightforward. The formula is:
Sales Tax = Taxable Purchase Price x Sales Tax Rate
For example, if you buy something for $100, you would multiply $100 by 0.0735 (which is 7.35%) to get a sales tax of $7.35.
Of course, the easiest way to calculate sales tax is to use a Point of Sale (POS) system. POS systems calculate the correct sales tax automatically.
Are there exemptions from Scottsdale sales tax?
Yes, some items and services are exempt from Scottsdale sales tax. These often include:
- Most groceries
- Prescription medications
- Certain utilities
- Items purchased for resale (with a resale certificate)
- Manufacturing equipment
- Some purchases made by nonprofit organizations
If you own a business, understanding these exemptions is crucial. You need to know what’s taxable and what isn’t to collect and remit sales tax accurately. Mistakes can lead to penalties and audits.
Also, depending on your industry, you might qualify for other, more specific exemptions. Because tax laws can be complex, it’s always a good idea to talk to a qualified tax professional or consult the Arizona Department of Revenue (ADOR) for guidance specific to your business.
How to File and Pay Scottsdale Sales Tax
If you’re doing business in Scottsdale, you’ll need a Transaction Privilege Tax (TPT) license. Think of it like permission from the state to collect sales tax. You can obtain this through the Arizona Department of Revenue (ADOR).
How often you file and pay your sales tax depends on your sales volume. You’ll either file monthly, quarterly, or annually. ADOR decides this for you when you get your license.
To file, you’ll need to submit a sales tax return to ADOR. The easiest way is online through AZTaxes.gov. It’s a pretty straightforward system. Some businesses can still file on paper, but online is generally preferred.
The most important thing is to file and pay on time! Penalties for late filing or payment can add up quickly.
Keep an eye out for updates from ADOR. They’ve been rolling out a new online filing system, so make sure you’re using the correct platform when you file.
How does Scottsdale sales tax compare to other cities?
When you’re shopping around the Phoenix area, sales tax can definitely add up. Here’s how Scottsdale stacks up against some of its neighbors:
- Phoenix: 8.6%
- Tempe: 8.1%
- Mesa: 8.3%
- Chandler: 7.8%
As you can see, Scottsdale’s sales tax rate is pretty competitive. It’s lower than Phoenix and Mesa, and only slightly higher than Tempe and Chandler. This can make a difference if you’re making a big purchase and have the option of shopping in different cities.
Ultimately, where you shop will depend on a lot of factors, but it’s good to know where Scottsdale stands in terms of sales tax!
Business Personal Property Tax and Property Tax
Businesses in Scottsdale also need to be aware of property taxes.
Business Personal Property Tax
This tax applies to movable property that a business owns. That includes machinery, equipment, furniture, and other capital items. To learn more about this tax, contact the Maricopa County Assessor.
Property Tax
Scottsdale property owners also pay property taxes. Here’s the breakdown for the 2023/2024 tax year:
- Primary: $0.5150 per $100 of assessed value
- Secondary: $0.4464 per $100 of assessed value
- Combined: $0.9814 per $100 of assessed value
In Closing
Understanding Scottsdale’s sales tax is crucial for businesses operating within the city. We’ve covered the current sales tax rate, potential future changes, common exemptions, and the procedures for filing and remitting sales tax to the city.
For businesses, compliance is key. Accurately collecting sales tax, filing on time, and maintaining meticulous records are essential for avoiding penalties and ensuring smooth operations.
Keep in mind that sales tax laws can change. Whether you’re a business owner or a Scottsdale resident, staying informed about any updates or changes to Scottsdale’s sales tax regulations is a smart move. The City of Scottsdale website is a great resource.
Because every business is different, consider consulting with a qualified tax professional. They can give you personalized advice and help you stay on top of your tax obligations.