Transaction Privilege Tax – Residential Rental This article provides general information about transaction privilege tax on Arizona residential rental businesses and is intended for the property owner/landlord of Arizona residential rental real property.  The transaction privilege tax is a tax on the privilege of doing business in Arizona.  The transaction privilege tax is imposed on persons engaged in business under the residential rental classification by the Model City Tax Code. In case of inconsistency, error, or omission in this publication, the language of the Model City Tax Code will prevail.  Every residential rental property owner is required to obtain an Arizona transaction privilege tax (TPT) license from the Arizona Department of Revenue for each location where residential rental income is taxable.  This applies regardless if the owner rents the property themselves or employs a property management company (PMC).  See the Transaction Privilege Tax – Residential Rental (Publication 645). What is residential rental? Residential rental is the rental of real property for a period of more than 30 days for residential purposes and not commercial purposes.  Not all cities license residential rental properties.  Please refer to the Residential Rental Licensing Matrix found on azdor.gov to determine if your city requires a TPT license. What residential rental income is taxable? All payments made by the tenant or on behalf of the landlord are taxable (list is not inclusive). Common income sources Rent Non-refundable and forfeited deposits Late payment fees Pet fees Federal rent subsidies (HUD) Fees passed onto the tenant Common area fees Maintenance charges Homeowner association fees Landscaper maintenance Property tax Pool Service Repairs and/or improvements Deductions Deductions must be properly segregated in all documents and accounting records.  Business records must be kept and maintained.  In … Continue reading Owners of Arizona Residential Rental Real Estate Must Collect & Pay Rent Tax