State of the state: Arizona short-term rental rules

In this series of blog posts, we offer an overview of the short-term rental (STR) lodging tax obligations for certain states, along with the latest rules on STR operations.

Arizona offers warm, sunny weather, Southwest cuisine and culture, and desert beauty — including the Grand Canyon, one of the top tourist attractions in the United States. All of this contributes to Arizona’s status as a popular vacation spot, and STRs there are in high demand.

While the state government has traditionally protected the short-term rental industry with legislation limiting the ability of local governments to regulate vacation rentals, that stance has generally softened in recent years as communities become more vocal about the impacts of vacation rentals on their neighborhoods.

In Arizona, lodging taxes operate a bit differently than in other states. Vendors are taxed for the privilege of doing business in the state, with Transaction Privilege Tax (TPT) levied on STR businesses according to their gross receipts. For tax purposes, STRs in Arizona are defined as reservations of less than 30 days. STR business owners may pass the taxes on to their guests. STRs in Arizona may also be subject to county excise tax and local transient occupancy tax.

Arizona STR operators are legally required to register with the Arizona Department of Revenue. Hosts can register online to receive a TPT license then pass TPT on to guests when they’re billed.

Arizona requires all STR online marketplaces, such as Airbnb and Vrbo, to collect and remit state and local taxes on Arizona STRs. If taxes aren’t being paid on behalf of an operator, they’re responsible for paying and remitting them to state tax authorities.

In 2017, Arizona passed a law that largely prohibited cities, towns, and counties from restricting STRs, but the state has gradually eased some of the restrictions on local control.

A 2019 law required STR operators to obtain a TPT license and include that license number in all ads. It also banned STRs from hosting special events that would normally require a permit, such as large parties. Under that law, municipalities were also allowed to require STR owners to provide contact information for someone who could respond to complaints in a timely manner.

In 2022, a new state law authorized cities and towns to regulate short-term rentals in these ways:

• Requiring permits or licenses
• Requiring community notification of operations
• Mandating liability insurance coverage
• Fining owners or management companies when guests violate ordinances

Under the ordinance, local law enforcement is authorized to impose fines of up to $3,500 or three nights’ rent for violations. STR operators that have three violations within 12 months may face an Arizona Department of Revenue hearing that could lead to a yearlong suspension. If an STR violation involves a wrongful death, felony offense, or if a host willfully houses a sex offender, local authorities may suspend that property’s license for a single violation.

In 2025, the state took back some control with a law that specifies how far local governments can go in regulating accessory dwelling units (ADUs). The measure, which applies to cities with populations over 75,000, bars local governments from banning the use of ADUs for STRs. Cities with stricter rules than allowed by the state law — such as Phoenix — must change their laws to comply. 

Local governments have taken advantage of greater STR regulatory powers in recent years, with several local governments approving new STR ordinances, including Chandler, Coconino County, Flagstaff, Mesa, Paradise Valley, Phoenix, and Scottsdale.

Avalara MyLodgeTax can help vacation rental hosts automate and simplify lodging tax compliance on the local and state level, including tax registration and filing. For more on STR lodging taxes in Arizona, see our state vacation rental tax guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.