AZ rental privilege tax @2.5%?

General Real Estate Investing
1

I just received a letter from the city of Avondale instructing me to apply for a privilege license tax/business license for my rental.

They will assign me a tax license and send quarterly tax returns for reporting the tax due @ 2.5% of the gross income.

They also want me to send a schedule of the rental income. I’ve owned this house for a year.

Is this new? Can anybody shed some light on this tax for me?

I have another rental in Phoenix…Should I contact them or just wait for their similar letter?

I was completely unaware of paying any taxes to the city for my rentals…just doesn’t seem fair…

Maybe it’s time for me to do some lease options with my renters…what do you think?

2

Since you are not engaged in a retail business for which sales taxes apply to your transactions, how are you affected by this requirement other than to obtain a license to operate a rental property?

Montgomery County MD requires landlords to obtain a rental dwelling license for each rental they operate with the license jurisdiction. License fee for me is an annual charge of $56. No “sales tax” on collected rents, though I do pay income taxes on my net rental income.

3

I believe that the rental tax and the rate is not county but city specific. This may be new for the city of Avondale, but is certainly not new for Arizona. Many cities in Arizona have a similar tax.