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ArizonaSB 1274Fifty-seventh Legislature - First Regular SessionSenateWALLET

tax corrections act of 2025

Sponsored By: J.D. Mesnard (Republican)

Signed by Governor

agentappealclaim applicationcompensationcontractordefinitionsdelayed repealdepartment of revenue (dor)dor (see also: department of revenue)eligibilityemployeeemploymententity-level tax electionexcluded from withholdingextension of withholdingfederal assessmentgambling winningsimputed underpaymentindividual income tax general welfare rebatelegislative findingspartnershipspreparation of tax returnsprohibitedreportretail classificationretroactivityruless corporationssubtraction from arizona gross incometax corrections act of 2025taxationtaxation - title 42taxation of income - title 43

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Bill Overview

Analyzed Economic Effects

13 provisions identified: 7 benefits, 6 costs, 0 mixed.

Lower vehicle tax for some visitors

A nonresident buying a vehicle in Arizona can pay less Arizona transaction tax when their home state allows a matching use-tax exemption and has a lower tax rate or no excise tax. The buyer must get the special 90-day nonresident vehicle registration permit.

Seasonal farmworkers can choose withholding

Seasonal farmworkers whose duties are only planting, cultivating, harvesting, or field packing crops can choose Arizona tax withholding. Employers must withhold tax when a worker makes this choice. It changes when workers pay, not how much tax they owe.

Less audit filing for health nonprofits

Qualifying health nonprofits no longer need to file their annual independent audit with Arizona’s tax department to meet the sales tax exemption definition. They must still be recognized as nonprofits under federal law and use, save, or invest at least 80% of annual receipts for health or medical education and charitable services. An independent certified public accountant must still prepare the annual audit.

Lottery ticket tax treatment clarified

Arizona’s retail tax exclusion covers lottery tickets or shares issued under the specified state lottery law. The change clarifies which lottery products receive this tax treatment.

Lower taxes on qualifying business purchases

Arizona reduces transaction tax on qualifying business sales and purchases, including property for manufacturing, mining, farming, transportation, research, and certain technology facilities. Heavy truck and trailer sales exclude amounts tied to the federal excise tax; certain other direct federal-government sales deduct 50% of the sale amount. Solar retailers must register and keep sales records. Qualified forest equipment purchases through December 31, 2026, require approved certification; environmental facility construction deductions last 10 full years after construction begins.

Pass-through firms can elect entity tax

For taxable years beginning after December 31, 2021, eligible partnerships and S corporations make Arizona’s entity-level tax election by filing their Arizona return. The election covers income tied to resident owners and Arizona-source income tied to nonresident owners.

Tax rules for telecom and energy firms

Arizona excludes certain retailer pay tied to wireless equipment transfers from the transaction tax base. Gas used for specified pipeline or liquefied natural gas equipment is not treated as a sale. Coal sent for refining is also not a sale when title or possession returns to the power plant owner or operator.

Higher withholding on gambling prizes

Arizona lottery, racing, fantasy sports, and event wagering operators must withhold state tax from prizes subject to federal withholding. The amount is based on Arizona’s highest individual tax rate, replacing the former amount tied to 20% of federal withholding.

No interest on family tax rebates

Arizona families tax rebates do not earn interest. This rule applies retroactively to rebates issued from after October 29, 2023. The law does not state an interest rate or rebate amount.

Tax on prepaid calling cards

Retailers must apply Arizona’s transaction tax to prepaid calling cards and related authorization numbers, including reauthorization sales. The tax may raise the price buyers pay. The law does not state the rate.

Revenue staff face tax-preparation limits

Arizona Department of Revenue employees, agents, contractors, and their managers or supervisors cannot prepare or help prepare tax returns for pay. The rule covers returns required by federal, state, or local governments. Violations are grounds for immediate dismissal or removal from department duties, as allowed by law.

Buyers may owe satellite tax penalties

Arizona’s tax department can ask a purchaser to prove that a seller met the rules for a satellite television or data transmission equipment deduction. If the purchaser cannot prove this, the purchaser owes the tax, penalty, and interest the seller would have owed. Paying clears related tax liability under the law.

Partnerships must report federal tax changes

When a partnership amends its federal return under section 6227, it must file an Arizona return showing related changes. Any required payment or partner statements are due within 90 days after the IRS makes its final decision.

Sponsors & Cosponsors

Sponsor

  • J.D. Mesnard

    Republican • Senate

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 21 • No: 0

Senate vote • 3/17/2025

C&P

Yes: 8 • No: 0

Senate vote • 3/12/2025

DP

Yes: 7 • No: 0

Senate vote • 2/3/2025

DP

Yes: 6 • No: 0

Actions Timeline

  1. Final Reading: Passed

    5/7/2025Senate

  2. Conference Committee: No Action

    4/17/2025Senate

  3. Third Reading: Passed

    3/25/2025Senate

  4. Committee of the Whole: do pass amended

    3/24/2025Senate

  5. undefined: C&P

    3/17/2025Senate

  6. undefined: DP

    3/12/2025Senate

  7. Third Reading: Passed

    2/27/2025Senate

  8. undefined: PFC

    2/10/2025Senate

  9. undefined: DP

    2/3/2025Senate

  10. Conference Committee: No Action

    Senate

Bill Text

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