Hiring your first employee in Arizona

What do you have to register for before your first payroll?

Arizona lets you register for almost everything on one form. The Arizona Joint Tax Application covers transaction privilege tax, use tax, withholding and unemployment insurance in a single submission, and Revenue forwards the employment portion to Economic Security. The catch is that one application still produces two separate accounts with two numbers, and Economic Security makes its own liability decision afterward. Workers compensation is not on this form at all, and neither are city business licences.

Does Arizona require income tax withholding?

Yes. You register with the Arizona Department of Revenue, as soon as the business commences operations in arizona, by filing the arizona joint tax application.

Arizona is unusual in that the employee picks the withholding rate rather than claiming allowances: every new employee files Form A-4 within five days of hire to elect a percentage. If the employee does not return an A-4 within those five days you must withhold at 2.0% until they elect otherwise, so a missing form is not an excuse to withhold nothing. Employees claiming exemption elect a zero percentage and must renew that election every year.

What unemployment insurance does Arizona charge a new employer?

A new Arizona employer pays 2% on the first $8,000 each employee earns, so roughly $160 per employee in the first year. A new Arizona employer that is not a successor to an existing business pays 2.0% for at least two full calendar years, after which you move to an experience rate. Tax applies only to the first $8,000 of gross wages per employee per year, raised from $7,000 in 2023. The trap is that you must keep reporting wages quarterly even after an employee passes the $8,000 ceiling, because those reports establish benefit eligibility whether or not tax is due.

Do you need workers compensation insurance in Arizona?

Yes, from your first employee. Arizona sets no headcount to reach, so there is no free window before coverage is required.

• all public and private employers with any regularly employed workers
• employees of a contractor whose work is a part or process in the hiring employer's own trade or business
• covered employees under a professional employer agreement

Arizona has no headcount cushion. Every person who employs workers regularly employed in the same business is subject to the workers compensation chapter, and regularly employed expressly covers part-year and seasonal work, so coverage is required from your first employee. Domestic servants in a private home are the only carved-out category. Watch the contractor rule: if you hire a contractor to do work routine to your own business and you keep supervision or control, that contractor's employees count as yours for coverage purposes.

How quickly must you report a new hire in Arizona?

Within 20 days after the employee is hired, rehired, or returns to work. Reports go to the Arizona Department of Economic Security, via the Arizona New Hire Reporting Center.

Every employer doing business in Arizona must report each new hire, and also each rehire or return to work after a layoff, furlough, unpaid leave or termination, within 20 days. Employers who file electronically get a different clock: two monthly batches no more than sixteen days apart, which is tighter than 20 days for some hires. If you employ people in two or more states and report electronically you may designate one state to receive all your reports, but you must notify the federal government which state you picked.

Does Arizona have paid family leave or state disability insurance?

No. Arizona runs no state paid family leave fund and no state disability insurance, so there is no payroll deduction of that kind and no extra account to open.

Arizona runs no state paid family leave or temporary disability programme, so there is no payroll contribution to withhold. What Arizona does have is a mandatory earned paid sick time entitlement paid entirely out of the employer's own pocket rather than an insurance pool. Employees accrue at least one hour for every 30 hours worked, capped at 40 hours a year if you have 15 or more employees and 24 hours if fewer, counting full time, part time and temporary staff alike. That 15 employee line is measured across the year, so a business that briefly hit 15 falls into the higher tier.

Do you need a sales tax permit in Arizona?

Arizona does not really have a sales tax. The transaction privilege tax is levied on the vendor for the privilege of doing business, not on the buyer, which means the legal liability is yours whether or not you separately charged the customer. The state licence costs $12 per business location, and businesses with a physical presence must also get a city or town licence in each municipality where they operate, at that city's own fee on top. The licence runs on the calendar year and must be renewed by January 1. One useful exception: a remote seller with no physical presence pays the same $12 but renews for free, because no municipal fees attach.

Does a marketplace like Amazon or Etsy handle the tax for you?

If you sell into Arizona only through a marketplace that collects payment and remits for you, Arizona does not require you to hold a licence or file returns on those sales at all, regardless of physical presence. The trap sits on the other side: if you also sell direct, through your own site, by phone or by mail, those sales are yours to licence and report, and the marketplace's collection does not cover them. A business that runs a marketplace for others and also sells its own goods may need two separate licences.

If your sales drop, when can you stop collecting?

Arizona's economic nexus test looks at both the previous and the current calendar year, which builds in a trailing obligation. A remote seller that met the threshold in the previous year, or meets it during the current one, must collect for the following year as well, so a single strong year drags the obligation into the next even if sales collapse. Only when you fail the threshold in both years may you cancel, and cancelling is something you must actively do rather than something that happens automatically. Leaving a dormant licence open keeps the annual renewal duty and its late penalties alive.

Does Arizona charge a tax on revenue rather than profit?

Arizona levies no gross receipts tax separate from the transaction privilege tax, so there is nothing extra to register for here. Be aware though that the transaction privilege tax is itself structurally a gross receipts style tax: it is imposed on the seller for the privilege of doing business rather than on the purchaser, and it is measured by your receipts. That is why it sits in the sales tax section of this record rather than being duplicated here.

Do you have to register your out-of-state company in Arizona?

$150 for a foreign LLC registration statement and $175 for a foreign corporation's application for authority. Expedited processing is an add-on. Both filings require a certificate of good standing from your home state dated no more than 60 days before delivery, and the corporation filing also requires certified copies of your original articles and every amendment.

The fee difference between entity types is not the real cost gap. A foreign corporation must publish its application in a newspaper after the Commission approves it, and that cost sits entirely outside the $175 filing fee. A foreign LLC has no publication requirement at all, so the LLC route is cheaper by considerably more than the $25 headline difference suggests. Do not publish before approval, because the approval letter tells you how and where, and publishing early can mean paying twice.

Where these figures come from

Every number on this page was read on Arizona's own agency pages, its statute, or a current-year official form, and this record was last reviewed on 2026-09-08. Where a state's explainer page disagreed with its statute or its current form, we followed the statute or the form and said so in the relevant section, because a state's consumer-facing pages are often the last thing updated when a figure changes.

Anything we could not confirm on a primary source is left blank rather than estimated. A missing figure on this page means we could not verify it, not that it is zero.

This is general information, not legal or tax advice. Rules change and your circumstances matter. Confirm anything you are about to act on with the agency named beside it.