Rental of Real Property


Ordinance 4841 - passed and adopted May 19, 2008. Effective date is Oct 1, 2008 (see the Residential Rental Tax Notice)


You owe tax on real property rentals if:
You are in the business of renting or leasing real property. If you rent residential property to non-permanent residents, see the Transient Lodging Tax page.

Tax Rate
The tax rate is 1.75% of the gross income. Income is any value received either as funds or bartered services or merchandise.  (Note: The Mesa City Tax rate increased to 1.75% effective 07/01/2006)

Collection of Tax
You may choose to charge the tax separately on each sale, or include transaction privilege tax in your price. If you over charge any tax to your customers, you must remit the excess tax to the city.
If your price includes transaction privilege tax, you can compute how much of the total price is transaction privilege tax. You may deduct the total city, state, and county transaction privilege taxes from your gross receipts.

Examples of taxable facilities include:

  • office buildings
  • stores
  • parking and storage facilities
  • apartments/homes/duplex/triplex/fourplexes
  • stores/factories/farm land
  • banquet and meeting halls

You are "in the business" and taxable if:

  • You have one or more non-residential rental units
  • You have 2 or more residential units available for rent in the State. (Prior to October 1, 2008, the tax code specified 3 or more residential units in the State).
  • You have 1 residential unit and one or more commercial units
    A unit is one real property location rented to one tenant. For example a three-story office building rented to one law firm is one unit. On the other hand, if you rent three offices in a medical office building to three separate physicians, each office is one unit.


Special situations

  • Sub-Leases
    When a property is subleased, the taxable landlord is the one directly leasing to the tenant in actual possession of the property.
  • Additions to Rent
    Extra charges included in rent for services such as cleaning, common area maintenance fees, tenant improvements, real property taxes, security services, insurance and utilities are taxable as part of rental income. But when a landlord installs individual utility meters for each tenant and charges each tenant for this service based on the meter reading, then those utility charges are not taxable.
  • Monies received from the use of laundry rooms and or vending machines are also considered part of rental income.
  • Security Deposits
    Security deposits are only taxable if and when they are forfeited. Non-refundable deposits are taxable when received.


Exemptions
Charges by primary heath care facilities to patients of such facilities for use of rooms or other real property during the course of their treatments by such facilities are exempt.

The fair market value of one apartment in an apartment complex provided rent free to an employee is not taxable. For complexes with more than 50 units, an additional apartment provided rent free to an employee for every additional 50 units is not taxable.
 

 

Office Locations:
Licensing Office
55 N. Center St.
Mesa, AZ  85201
Phone: 480-644-2316
FAX: 480-644-3999

Tax Audit & Collections
20 E. Main St, Suite 450
Mesa, AZ 85201
Phone: 480-644-3816
FAX: 480-644-2687


Office Hours:

Monday - Thursday
7:00 a.m. to 6:00 p.m.
Closed Fridays

Mailing Address:
Tax & Licensing Office
P.O. Box 1466
Mesa, Arizona 85211-1466

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