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Arizona Wage and Payroll Tax Facts

February 01, 2024

Having to comply with unique state taxes and wage laws can make processing payroll doubly daunting. Here’s everything you need to know about these rates and laws for the state of Arizona.

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The Grand Canyon State uses a minimum wage rate substantially higher than the rate required by the federal government, though the local minimum wage rate for Flagstaff is higher still. The state also has a Paid Sick Leave program guaranteeing time off to employees within its borders.  
 
When it comes to processing payroll, Arizona-based organizations must handle the following taxes in addition to those required by the federal government:

The below information was last updated January 30, 2024. It is not intended as legal or tax advice.

Arizona Minimum Wage Rates

Wage Type

Arizona Rates

Federal Rates

Minimum Wage

$14.35

$7.25

Tipped Minimum Wage

$11.35

$2.13

Actual Tip Credit

$3.00

$5.12

Local Minimum Wage Rates

In addition to the state-wide minimum wage rates above, the cities of Flagstaff and Tuscon have unique minimum wage rates as well:

Wage Type

Flagstaff Rates

Tuscon Rates

Minimum Wage

$16.80

$14.35

Tipped Minimum Wage

$14.80

N/A

Actual Tip Credit

$2.00

N/A

Arizona State Income (SIT) Rates

Arizona has a flat income tax rate of 2.5%, meaning all residents pay the same amount regardless of their income levels.

Additional Arizona SIT Details

Supplemental Withholding Computation

 N/A

Valid Filing Status
  • S = Single
  • M = Married

Exemptions (rates)*
  • 0.5%
  • 1.0%
  • 1.5%
  • 2.0%
  • 2.5%
  • 3.0%
  • 3.5%
Exemptions (individuals)
  • Persons performing domestic services in a private home
  • Casual laborers performing labor outside the course of the employer's trade or business
  • Certain part-time or seasonal employees working in agricultural labor (e.g., planting, cultivating, harvesting, or field packing seasonal crops)
  • Residents who work wholly in another state
  • Persons with no Arizona income tax liability
  • Native Americans living and working on the reservation
  • Interstate carrier employees
  • Nonresident military spouses
  • Movie workers
  • Residents of reciprocal states (see below)
  • Short-term workers (working less than 60 days a year for certain employers)

Form W-4

 Arizona Form W-4

Reconciliation Frequency

Annually

*Employees may elect to have gross taxable wages withheld at one of these rates.

Arizona State Unemployment Insurance (SUI) Rates

SUI provides unemployment benefits to eligible workers who are unemployed through no fault of their own (as determined by state law) and meet the state’s eligibility requirements.

Arizona SUI Tax Details

Taxable Wage Base

$8,000

Employee Subject to Tax

No

Rates for Experienced Employers

0.05% – 14.03%

Rates for New Employers

2.00%

Effective Period

Calendar Year

Voluntary Contributions Allowed

Yes; must be made by January 31 of the rate year

Arizona State Disability Insurance (SDI) Rates

SDI benefits are normally funded by employees through mandatory payroll deductions from each paycheck. Arizona, however, doesn't require employers to collect an SDI tax.

Miscellaneous Arizona Tax Information

Reciprocal Agreement(s)

Reciprocal agreements are when workers who live and work in different states are only required to pay taxes to the state where they live. Arizona currently has reciprocal agreements with the following states:

  • California
  • Indiana
  • Oregon
  • Virginia

Residents of those states can request an exemption from Arizona tax withholdings by filing for a Withholding Exemption Certificate (WEC).

Paid Sick Leave (PSL) Taxes

The state of Arizona doesn't require employers to collect PSL taxes, but it does have a program providing such leave to eligible employees:

Arizona PSL Details

Covered Employees

 Full-time, part-time, and temporary employees

Accrual Method(s)

 1 hour of leave for every 30 hours worked

Annual Accrual Maximum
  • 24 hours for employers with fewer than 15 employees
  • 40 hours for employers with 15 or more employees

Carryover Allowed

 Yes; up to the annual accrual maximum

Probationary Period

 Yes; 90 days

Frontloading Allowed

 Yes

FAQs

 Arizona Paid Sick Time FAQs

Paid Family and Medical Leave (PFML) Taxes

The state of Arizona doesn't require employers to collect PFML taxes, nor does the state have a program providing such leave to employees.

Arizona Employer Registration

The agencies below can help with your state-based employer registration, including best practices, account numbers, and unemployment information. Contact the Department of Revenue for withholding tax topics and the Department of Economic Security for unemployment tax topics.

Registration Details

Department of Revenue

Department of Economic Security

Phone

 (602) 255-3381 (602) 771-6602

Online Registration

 AZTaxes Registration Application Information Page

Registration Form

 Form JT-1

Registration Instructions

Online and paper registrations are allowed. Account number(s) will be issued during online registration or within 10-14 days via mail. Separate account numbers for different tax types will be issued under the combined registration.

Employer Self-Service Login

 AZTaxes Login Page Tax and Wage System Login Page  

Additional Arizona Payroll Tax Resources

 

This information is provided as a courtesy and may be updated at any time. It is not intended as legal or tax guidance. If you have questions or concerns, we encourage you to seek the advice of a qualified CPA, tax attorney, or advisor.

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