Businesses engaging in taxable activity are required to apply for an Arizona Transaction Privilege Tax (TPT) license through the Arizona Department of Revenue (ADOR) and report “TPT”.
All Arizona cities and towns have a transaction privilege tax which is commonly referred to as a sales tax. It is, however, the tax on the privilege of doing business in Arizona and is not a true sales tax. The seller is liable for the tax but may pass the burden of the tax on to the purchaser. It includes but is not limited to taxation of retail sales, construction, residential and commercial rentals, utilities, communications, and amusements.
Each municipality and county sets their own tax rate, therefore the total tax rate varies throughout the state. The transaction privilege tax rate for Prescott is 2.95%. For most business classifications, the combined rate for the State of Arizona and Yavapai County is 6.35%. The total tax rate within the City of Prescott is 9.30%.
The City of Prescott tax rates and business classifications are detailed in this tax chart.
As of January 1, 2025, residential property owners should no longer collect and remit city transaction privilege tax (TPT) on the income received from long-term residential rental stays of 30 days or more. Property owners must still register the rental property with the county assessor.
TPT licenses that included only the business code 045 for residential rental have been closed by the Arizona Department of Revenue on 12/31/2024 and will not be renewed. Owners can still file for prior periods online even if the license has been canceled or the location has been closed.
*Please note: Vacation Rentals, hotels, motels or other transient lodging businesses must still collect, file and remit TPT under the transient lodging and hotel classifications.
*Commercial lease/rent must also still collect, file and remit TPT for any income derived from the commercial rent under the commercial lease classification.
The Arizona Department of Revenue (ADOR) is the single point of administration and collection of state, county and municipal transaction privilege tax. Be sure all tax owed to the City of Prescott is reported to ADOR on a separate line under the city region code PR.
Use tax is levied on the purchase of tangible personal property stored, used or consumed within Prescott City limits, when an equivalent city privilege tax has not been paid. A more detailed explanation of the differences between the privilege and use taxes can be found here:
The City has prepared the following brochures with general tax information for some of the most common business classifications.
Food Trucks/Mobile Food Units: In addition to obtaining a Transaction Privilege Tax (TPT) License, a separate license and inspection from the Yavapai County Environmental Health Division is required.
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