Rental or Leasing of Real Property
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.
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
Examples of taxable facilities include:
- office buildings
- parking and storage facilities
- 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
- 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.
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.
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.