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Tax Audit - Rental Properties
 

Report a Rental Property
All residential rental properties located in the City of Chandler are required to obtain a Transaction Privilege Tax license, and report and pay sales tax to the City.  There is no State tax on residential rentals. Landlords must register their rental property with the Maricopa County Assessor’s Office.
 
We are interested in pursuing all rental properties for compliance.  If you would like to report a rental property  for licensing compliance, we will gladly research the location and verify all tax and licensing requirements are met.

Real Property Rentals
The following information is included in this section:

• What is a Real Property Rental?
• What is the Tax Rate?
• When is the Tax Due?
• What is included in Taxable Income ?
• What Deductions Can I Take?

 

Defined
The renting, leasing, or licensing for use of real property located within the City of Chandler to the tenant in actual possession.  All real property rentals are subject to tax regardless of the number of rental units owned.  A separate license  is required for each location.
 

Tax Rate
1.5% of gross rental income, plus possible additional tax on transient lodging (see details in next column).

Liability
The lessor is personally liable for payment of the tax whether or not it was charged or passed on to the lessee.
 

Excess Tax
If more tax is collected than due, the additional amount must be reported as excess tax.
 

Due Date
Tax returns are due to the Arizona Department of Revenue based on the filing deadlines. The return must be filed even when no income has been received.
 

Taxable Income Includes:
1.  All common income sources:
     a. Charges for utilities, unless separately metered and “pass through” only
     b. Maid and laundry services
     c. Reimbursements (damages, keys, etc.) received from the tenants
     d. Non-refundable deposits
     e. Property tax paid by tenants
      f. Common area fees

2. Rentals to churches, non-profit organizations, and all governmental agencies.

3. Lodging space offered in exchange for services.
    However, apartment owners are  allowed one unit for manager or maintenance employees for each 50 units.

4. Income received for allowing vending machines on your premises.

Deductions
Deductions must be properly segregated in all documents and accounting records.  Business records must be kept and maintained.  In the absence of documentation, taxes will be assessed on gross receipts or estimated on a reasonable basis.
 
Common Deductions include:

1. Discounts and refunds.

2. Bad debts on which tax was paid.


3. State and City sales tax collected or factored. Only City taxes are allowed for  residential rentals.

4. Individually metered utility charges assessed tenants as a “pass-through” charge.

5. Leases for re-lease.

Additional Tax on Transient Lodging
In addition to the taxes levied as provided in Section 444 [Hotels], there is hereby levied and shall be collected an additional tax in an amount equal to two and nine-tenths percent (2.9%) of the gross income from the business activity of any hotel engaging or continuing within the City in the business of charging for lodging and/or lodging space furnished to any transient.  “Transient” means any person who, for any period less than thirty (30) consecutive days, either at his own expense or at the expense of another, obtains lodging or the use of any lodging space for which a charge is made on lodging or use of lodging space.