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Privilege Tax & Licensing

The Privilege Tax & Licensing division provides excellent customer service to the City’s taxpayers while collecting taxes owed to the City, facilitates voluntary compliance with City tax code, and enforces the tax code through taxpayer education, clear interpretation, and compliance audits. The division is located at 201 S Cortez Street, Prescott, AZ 86303 and can be contacted by calling 928-777-1268 or email.

Transaction Privilege Tax (Sales Tax)

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%. 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 8.35%.

Forms

** Note: Effective September 2016, all new City license applications will be processed through the Arizona Department of Revenue at www.AZTaxes.gov. See Tax Updates for more information.

Some tax and licensing forms are available for download here. For all others please call 777-1268 or stop by the Tax & Licensing Division at City Hall, 201 S. Cortez. Forms must be completed correctly and in entirety to be processed. Please call for assistance if you are unsure how to complete a form.

Use Tax

Use tax is levied on the purchase of tangible personal property stored, used or consumed within Prescott City limits, when a equivalent city privilege tax has not been paid. A more detailed explanation of the differences between the privilege and use taxes can be found in the “What are Use Taxes?” brochure.

Tax Code and Guides

Additional information is detailed in the brochures below:

Resources

FAQ

Q. What is the total tax rate?
A. The combined tax rate for the State of Arizona, Yavapai County, and the City of Prescott for all taxable activities is 8.35%. The combined rate consists of 5.6% for the State, 0.75% for the County and 2% for the City of Prescott.
Q. Does the City of Prescott tax the rental of real property?
A. Yes, the City taxes both the rental of residential and commercial property. The tax rate is 2% for all rentals of real property.
Q. Is food taxable in Prescott?
A. Yes, at the City tax rate of 2%. Both the State and Yavapai do not tax food for home consumption.
Q. Do I have to file a tax report if I didn't do any business in Prescott?
A. Yes if you receive a tax report you have to complete it and return it whether you did any business in Prescott or not. To simplify the processing of returns when there has been no activity there is a block to check that indicates no activity. All returns must be signed to validate.
Q. Is there a transaction privilege tax application on line?
A. Yes, Beginning September 2016, all City tax license applications are consolidated with the State’s online application system at www.aztaxes.gov.
Q. Do I have to pay privilege tax if I do not charge my customers?
A. Yes it is the responsibility of the business to remit privilege tax on their gross receipts less applicable deductions whether you pass the tax on or not.
Q. Are Internet sales taxable? If so, at what tax rate?
A. Items sold by Prescott based businesses via the Internet to residents of Arizona are taxable and reported to the City at the 2% tax rate. The State would also collect taxes on sales made within Arizona.
Q. Are repair, service installation labor and shipping taxable.
A. For retail transactions these types of charges are not taxable if the charges are separately stated to the customer and the seller properly accounts for the charges. Contractors who perform labor only for customers are subject to privilege tax less the allowed 35% contracting deduction.
Q. Where do the city privilege (sales) and use taxes go?
A. 1% goes to the General Fund and 1% goes to street improvements.