Arizona law gives qualified taxpayers a state income tax credit to be applied against increased excise taxes imposed by county governments. The credit is available each year depending on the taxpayer's income. Even if the credit exceeds the taxpayer's income tax liability, the taxpayer is entitled to payment for the credit in a similar manner to a tax refund.
Arizona Excise Tax
Arizona excise taxes are impose by all counties except Pima County. The purpose of the tax is to provide revenue to pay for county services, such as public transportation, or operate county facilities, such as a jail. The county excise tax is typically added to the state sales tax, which is 6.6 percent as of August 2011. For example, Maricopa County adds a 0.5 percent transportation excise tax and a 0.2 percent jail-facilities excise tax to the state sales tax.
Increased Excise Tax Credit
In 2000, Arizona voters passed a proposition authorizing a credit for increased excise taxes paid. The purpose of the credit is to provide disabled and low-income individuals with financial assistance in the form of tax relief. In 2004, the Arizona Citizens' Finance Review Commission issued a report reviewing revenue and tax policy in Arizona. Among its recommendations, the commission supported continuation of the credit for increased excise taxes.
Eligibility for the Excise Tax Credit
An Arizona taxpayer is eligible for the excise tax credit if he cannot be claimed as a dependent by another taxpayer; and the taxpayer's adjusted gross income is $25,000 or less for a married joint filer or a single head of household filer, or $12,500 or less for a single filer or a married filing separately. A taxpayer is ineligible for the credit for tax years after 2002 if the taxpayer has been incarcerated in any federal, state or local facility for 60 days or more during the taxable year.
Claiming the Credit
Eligible Arizona taxpayers claim the credit for increased excise tax in one of two ways. If the taxpayer is required to file any other income tax form, such as Form 140A, the credit is claimed on the form using the work sheet provided. If the taxpayer is not required to file a tax form, the taxpayer should use Form 140ET to claim the credit.
- Arizona Department of Revenue: Excise Tax
- Maricopa County: County Excise Tax Rate
- Arizona Citizens’ Finance Review Commission: A Fiscal Tool Box
- Arizona Legislature: Section 43-1072.01 -- Credit for Increased Excise Taxes Paid
- Arizona Department of Revenue: Form 140A
- Arizona Department of Revenue: 2010 Credit for Increased Excise Taxes Form 140ET