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.

Arizona Minimum Wage Rates
Arizona State Income (SIT) Rates
Arizona State Unemployment Insurance (SUI) Rates
Arizona State Disability Insurance (SDI) Rates
Miscellaneous Arizona Tax Information
Arizona Employer Registration
Additional Arizona Payroll Tax Resources

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:

Personal Income (a.k.a. State Income Tax)
State Unemployment Insurance (SUI)

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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