The Town of Fountain Hills is a "program city" under the State of Arizona Transaction Privilege Tax Program. As a result, taxes for the Town are reported to and collected by the State of Arizona Department of Revenue on form TPT-1. The State decreased the State sales tax rate by 1% effective May 1, 2013 thereby decreasing the total sales tax rate for purchases within Fountain Hills to 8.9%. However, the tax does not apply to any purchases that are not taxed by the State (for example, food and rentals) - those tax rates remain unchanged.
The Fountain Hills retail sales tax rate is 2.6% (1.6% for long term residential rentals) and is reported on a separate line with the region code of FH as follows:
- FH000 - Most business activity, including retail, construction, restaurant/bars, commercial rentals
- FH002 - Use tax
- FH003 - Hotel/motel (short term rental, less than 30 days) for contracts entered into prior to October 1, 2010
- FH025 - Hotel/motel (short term rental, less than 30 days) for contracts after October 1, 2010
- FH004 - Residential rentals (long term rental, more than 30 days)
- FH005 - Metalliferous mining
Please be aware that local sales tax is charged on food in Fountain Hills.
- Fountain Hills only 2.6%
- State/County 6.3%
- Total Combined Tax Rate 8.9%
- Combined Contracting Tax Factor (for construction contractors) 5.468639%
- Commercial Rent Rate 2.6%
- Commercial Rent Maricopa County .05%
- Commercial Rent Combined 3.1%
- Transient Lodging (Bed Tax) Rate (F.H.) 4.0%
- Transient Lodging Rate - Maricopa County/State 7.27%
Fountain Hills’ taxes out of Town of Fountain Hills purchases when the vendor has not collected the tax (commonly called use tax). Region code FH002 is reserved for use tax (rate 2.6%).
The transient tax (also referred to as bed tax) applies to all persons who obtain lodging or the use of any lodging space for any period of not more than 30 days. The activity is reported on a separate line of form TPT-1 with the region code of FH025 for all rental contracts entered into after October 1, 2010 (pre-existing contracts continue to use FH003 until the end of the agreement).
For lodging rentals less than 30 days, there is also a State tax of 7.27% that is in addition to the Fountain Hills Bed tax of 4.0% plus the sales tax of 2.6% for a total of 13.87%. If a home, condo, or any other space is rented for periods less than 30 days (i.e., weekly) then the transient tax applies for all periods even after 30 days.
For lodging rentals less than 30 days, there is also a State tax of 7.27% that is in addition to the Fountain Hills Transient Occupant tax of 4.0%. If a home, condo or any other space is rented for periods less than 30 days (i.e., weekly) then the transient tax applies for all periods even after 30 days. The total tax reported to the Department of Revenue is 13.87%.
For long term residential rentals over 30 days, the only tax collected is for Fountain Hills at the rate of 1.6%.
The combined tax rate for commercial rentals is 3.1% (2.6% for the Town of Fountain Hills and 0.5% for Maricopa County). Report under code FH000.
|Lodging (less than 30 days)
|Residential Rentals (over 30 days)
- State Sales/Use Tax 5.6%
- State/County Transient Lodging Tax 7.27%
- On new construction only
- One time tax
- Collected in stages as construction progresses
- Vacant land, not subdivided
- Subdivided into custom lots
- Construction begins on the subdivision, subcontractor hired for lot preparation (no home construction)
- Developer pays subcontractor for work performed each month
- Subcontractor pays to Arizona Department of Revenue all State, County and Fountain Hills sales tax when he receives payment from the developer (computed on the 65% rule)
- Subdivision is now complete, all site preparation is complete, no homes yet constructed
Sample: 10 lot subdivision with total payments to the site preparation subcontractor from the developer of $500,000
$500,000 x .65 = $325,000 Taxable $325,000 x .026 = $8,450
Fountain Hills Sales Tax $500,000/10 = $50,000 site preparation cost per lot
Lots sell for $100,000 each (sales tax has already been paid on $50,000) - Town is entitled to sales tax on the $50,000 profit for each lot
For each lot in subdivision $50,000 x .65 = $32,500 x .026 = $845 due to Fountain Hills (collected at escrow from the seller of the lot)
- Contract signed between builder and owner
- Builder begins work on home
- Builder bills owner monthly for work performed (i.e. $60,000 x .65 = $39,000 x .026 = $1014 Fountain Hills sales tax due
- Builder makes monthly payments until home is completed
- Developer pays contractor monthly for work performed
- The contractor is responsible to pay sales tax to the Department of Revenue on these payments
- The developer is responsible to pay sales tax at the close of escrow (i.e. when the seller receives payment). The developer may take a deduction for Sales Tax already paid.
For more information, visit the Arizona Department of Revenue Transaction Privilege Tax Factoring or send an email to Craig Rudolphy, Finance Director, email@example.com.