The Arizona Department of Revenue (ADOR) and Arizona cities are changing the rules for owners of residential rental properties. By 2016, all property owners who meet the licensing requirements will be required to be licensed and to individually file sales tax returns (transaction privilege tax). Licensing requirements for residential rentals are available on the ADOR website at Residential Rental Tax & Licensing Matrix.
The cities and Arizona are moving from the existing varied practices to a uniform licensing and tax return filing system. All cities and towns have agreed that 2015 will be the transition year, and to help facilitate this transition, cities in Arizona and ADOR will treat property managers and their owner clients as follows:
Effective for 2015:
- Property Managers are allowed to continue filing tax returns in the same manner they did for each City and ADOR in 2014.
- Property Managers will provide a list to the City no later than February 28, 2015 that identifies each of the Owners and their properties so the Cities can begin the process of creating these new records for consolidation with the ADOR system.
- Not later than June 30, 2015, all individual Owners must have complete license applications on file with the Non-Program Cities, or with ADOR for properties located in Program Cities.
- As long as new license fees for these Owners are paid by June 30, 2015, Cities will not assess any penalty for failure to file a timely complete application.
- Any Owner formerly reported under a Property Manager’s license that has already become individually licensed doesn’t need to do anything.
- ADOR and the Cities will continue to accept Property Manager tax returns through 2015 if they were allowed in 2014.
Effective for 2016:
- Every Owner must be separately licensed and identify each separate property as a separate business location.
- Every Owner must file a separate tax return. The return can be filed and paid directly by the Owner or by the Property Manager on their behalf. This is an issue of services provided between the Property Manager and the Owner.
- Property Managers that file returns on behalf of an Owner must provide a POA, or have inserted language to that effect in their contract with the Owner and entered into an MOU with ADOR.
Most Owners who have property with a Property Manager will be required to file. Additional information is available at Licensing Guidance.
Welcome to Arizona Sales Tax Simplification!
By Melinda Nelson, CPA & Michael Willett