Sales tax and rentals in Payson, AZ

Real Estate Broker/Owner with Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ

Prest Realty, Payson, AZWe've been in real estate in Payson for near 20 years, and we get a lot of people who call us for information. We don't mind, we feel part of our job is educating people.
We DO get a lot of repeat questions, which we answer over and over again.

I got a rare one the other day, however. A woman called up and asked how much sales tax she should write into a rental agreement with a tenant. It took me by surprise, because VERY few people even know there IS sales tax on rentals in Payson. Since there are many rentals in the area, I'm surprised that the town of Payson doesn't make it more widely known.
Sales tax on rentals is set by the cities or towns. So if you own rentals elsewhere in AZ, contact your town and ask, or contact a good property management company.


For years, Payson said "no sales tax on residential rentals". Then one day it occurred to someone that this could bring in revenue. So the town decided to charge sales tax IF an Owner has 3 or more residential rentals.To determine the tax, one takes the amount of rent (say, $850) and multiplies by .0212 ($850 X .0212 = $18.02) I know this one by heart, as one of our Owners has a number of $850 rentals.
We pass these charges on to the Tenant, so in the example above, the Tenant pays $868.02.

We have a few rentals in Star Valley, which is now its own incorporated town. Star Valley doesn't care HOW many rentals an Owner has. Even 1 residential rental is taxed 2%.

Now what do you do with the money?  Prest Realty is set up with the state of Arizona to pay the sales taxes for any of our Owners who needs to do so. So we collect it, and once a month we fill out the appropriate form and send the correct amount to the state (who pass the appropriate amount back the the correct town).

A private Owner would need to contact the state of Arizona, Department of Revenue for instructions.
Or, of course, they could just hire Prest Realty!

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Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA

Many, many years ago I had to deal with this in Hawaii and we charged the rent PLUS 4% and had to report and pay those funds to the state quarterly....and this was BEFORE there was software to make this task easy....all had to be done by hand,

Nov 08, 2009 10:10 PM #1
Diane Rice
Rice Prprty Mgmnt & Rlty, LLC, South Holland, IL - Lansing, IL

WOW!  Never heard of this before!  That is EXTRA bookkeeping and accounting!  All of that paperwork has to COST something.  Are your fees higher as a result? 

Nov 09, 2009 08:23 AM #2
Leslie Prest
Leslie Prest, Prest Realty, Sales and Rentals in Payson, AZ - Payson, AZ
Owner, Assoc. Broker, Prest Realty, Payson,

Wallace- Thanks for stopping by.

Diane- thankfully, the software I use to generate the Owner's monthly reports makes it easy to do. All we have to do is fill out the state form and write the checks. Only a few of our Owners have the "3 or more rentals" so it isn't TOO much trouble.

Nov 10, 2009 03:38 AM #3
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Leslie Prest

Owner, Assoc. Broker, Prest Realty, Payson,
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