Corporate Income Tax

Corporate Income Tax Decreasing
Net income is currently taxed at a flat rate of 6.968% or $50, which ever is greater. Beginning in 2014, the corporate income tax rate will decrease incrementally by the following schedule:

Corporate Income Tax Rate
2014 6.5%
2015 6%
2016 5.5%
2017 and thereafter

Calculating Taxable Income

Corporations have the option to either use the Double Weighted or 80% Sales Factor apportionment to calculate taxable income for Arizona. Like the Double Weighted apportionment, the 80% Sales Factor employs the same 3 factors to determine the percentage of income that is subject to taxation in the state of Arizona:

  • Value is the original cost of real and tangible property
  • Sales is defined as manufacturing and selling or purchasing and reselling
  • Sales in Arizona multiplied by 8 and divided by global sales
80% Sales Factor
The 80% Sales Factor calculation assigns different weights to each factor putting an emphasis on sales made in Arizona. The weight on sales increases over the 3-year phase in period. The calculation for 2009 and subsequent years is as follows:

  • Payroll paid in Arizona divided by global payroll
  • Value (original cost) of property situated in Arizona divided by the global value (original cost) of property
  • Sales in Arizona multiplied by 8 and divided by global sales
The 3 percentages are added together and divided by 10 to produce a ratio to apportion total taxable income to Arizona.

Sales Factor Increasing Weight
Beginning in 2014, the weight of the sales factor in the optional enhanced sales factor apportionment formula for corporate income tax will increase incrementally by the following schedule:

Sales Factor Percentage
2014 85%
2015 90%
2016 95%
2017 and thereafter