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Tangible products are taxable in Arizona, with a few exceptions. These exceptions include certain groceries, prescription medicine and medical devices, and machinery and chemicals used in research and development.
Arizona has a flat 2.50 percent individual income tax. Arizona has a 4.90 percent corporate income tax rate, a 5.60 percent state sales tax rate, a max local sales tax rate of 5.30 percent, and a 8.37 percent combined state and local sales tax rate.
The state use tax rate is the same as the state transaction privilege tax (TPT) rate (sometimes referred to as sales tax), currently at 5.6 percent.
The new default Arizona withholding rate is 2.0%. What if the employee wants their Arizona taxes to be overwithheld? Employees will still have the option of selecting a higher Arizona withholding rate than their wages might dictate and there is still a line to add an additional amount of Arizona withholding.
Yes, the employer should then select 2.0% as the default rate. This means by March 2023 the paychecks would have the default rate chosen for them.