Arizona sits in the southwestern United States and covers just under 300,000 km². Its northeastern border is part of the Four Corners. Almost seven million people call Arizona home, 1.4 million of them in the capital, Phoenix.
Say "Arizona" and most people picture the Grand Canyon, luxury resorts and golf courses. In recent years, though, the state has also become a hotbed of economic opportunity and high-tech innovation. Today Arizona is an ideal base for companies with global ambitions.
Entrepreneur magazine has ranked Arizona number one in the US for starting and growing a business for the past two years. In a Chief Executive Magazine survey, Arizona was voted the fourth most desirable state in the US for business.
A welcoming culture
Chris Camacho, President and CEO of the Greater Phoenix Economic Council, points to the positive market climate, the young workforce and the openness of the community. These, he says, are what attract foreign companies.
Phoenix Mayor Kate Gallego also describes an open city with a cosmopolitan entrepreneurial spirit. In her view, companies that choose to settle in Phoenix are welcomed by the community.
Strongly international
Jan Lesher, Director of the Arizona Commerce Authority, notes that more and more global companies see the Grand Canyon State as the right location for them. Beyond access to US markets, Mexico and South America, he sees a cultural fit as one of the reasons.
Roy Vallee, CEO of Avnet, indirectly confirms this. In Arizona, he says, his company enjoys a dynamic business climate along with a high quality of life, a mix few locations can offer. That makes it easier for the company to attract and keep talent.
Arizona also offers a unique foreign trade zone program that gives qualifying companies the lowest effective property tax rates in the US. Other programs, such as Arizona Job Training, the Enterprise Zone and further business support measures, contribute significantly to the state's strong overall growth.
FDI as a key part of the economy
850 international companies already have a location in the Grand Canyon State, and their investment has created almost 120,000 jobs. From 2013 to 2018, employment from FDI grew by 37.6 percent. By comparison, the private sector's overall growth of a solid 15.8 percent looks almost modest.
Arizona's economic opportunities are diverse in every respect, as the industries international companies invest in show. The broad category "other industries" leads with 116 projects, IT and software follow with 32 projects, and business services rank third with 18 projects. After Canadian companies, German companies have the second-highest number of operations in Arizona.
Income tax in Arizona
Arizona levies a flat income tax of 2.5% (since tax year 2023). On top of that, federal income tax applies.
Corporate income tax in Arizona
Arizona levies a corporate income tax of 4.9%. On top of that, federal corporate income tax applies.
Sales tax in Arizona
The USA has no VAT on the European model. Instead, states, counties and municipalities levy a local sales tax on the sale of goods (but not services).
Arizona sales tax rate
Arizona's state sales tax is 5.6%. Cities and counties add an average of 2.8%, so the combined rate averages 8.4%.
Arizona nexus laws & sales tax
Effective date:
October 1, 2019
Included transactions:
Gross proceeds from sales of tangible personal property or services, or gross income from business in the state. Services count toward the threshold; sales made through a marketplace do not.
Treatment of exempt sales:
Exempt sales and exempt services count toward the threshold
Trigger:
Sales only
Sales/transaction threshold:
$200,000 (2019)
$150,000 (2020)
$100,000 (2021 onward)
Evaluation period:
The threshold applies to sales in the previous or current calendar year
Additional information:
- Registration requirements: A remote seller must register in Arizona by the first day of the month that begins at least 30 days after crossing the economic nexus threshold.
- TPT law for remote sellers and marketplace facilitators HB 2757
Arizona marketplace sellers & sales tax
Learn more about registration requirements for marketplace sellers
Effective date for marketplace facilitators:
October 1, 2019
Economic nexus threshold:
For remote sellers, more than $200,000 in Arizona sales for calendar year 2019; more than $150,000 for calendar year 2020; and more than $100,000 for calendar year 2021 and later. For marketplace facilitators, more than $100,000 in Arizona sales per year. When calculating the threshold:
- Marketplace sellers should exclude marketplace sales when calculating the threshold
- Marketplace facilitators should include all sales through the marketplace
Registration requirements:
- Remote multichannel sellers: Once you cross the economic nexus threshold, you must register and collect Arizona sales tax on sales not taxed by a marketplace facilitator.
- Remote marketplace sellers: You don't need to register with the state if you sell only through one or two marketplaces. Contact the Arizona DOR for more information.
- In-state multichannel sellers: You must register with the Arizona DOR and collect tax on sales not taxed by a marketplace facilitator.
- In-state marketplace sellers: You must register. Contact the Arizona DOR for more information.
- Learn more here and here.
Find more state profiles in our overview of all US states. Which state is right for your company? Our guide Which US state is best for your company? explains. And how to run a US LLC with no US presence completely tax-free is shown by our sister site zerotax.llc.
How we help with Arizona:
Whether your Arizona business needs its own US company, and which state it should be based in, is something we work out together in a consultation. You'll find entity types, options and fees under US Company Formation.