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Arizona’s 2.5% flat income tax is one of the lowest in the US, making it one of the simpler payroll states. Rippling handles ADOR withholding, DES SUTA, Earned Paid Sick Time accrual, and workers’ comp compliance.
Arizona is a growing Sun Belt state with major business activity in Phoenix, Scottsdale, and Tucson across technology, financial services, real estate, and manufacturing. Arizona’s payroll environment is employer-friendly: a 2.5% flat income tax (one of the lowest in the US, effective January 2023), no state SDI or paid family leave, and a competitive SUTA rate on a modest wage base. The primary state-specific obligation is Earned Paid Sick Time (EPST) under the Fair Wages and Healthy Families Act.
Rippling’s Arizona payroll module provides:
| Contribution | Rate | Notes |
|---|---|---|
| FUTA | 6.0% (net 0.6%) | After SUTA credit; first $7,000 |
| Arizona SUTA (DES) | New employer 2.0% | On first $8,000 of wages (2024) |
| Social Security | 6.2% | Up to $168,600 (2024) |
| Medicare | 1.45% | No wage base limit |
| Workers’ Compensation | Varies by risk class | Mandatory; private market |
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| Contribution | Rate | Notes |
|---|---|---|
| Federal Income Tax | Graduated 10–37% | Per W-4 |
| Social Security | 6.2% | Up to $168,600 (2024) |
| Medicare | 1.45% + 0.9% surtax | Surtax above $200K single |
| Arizona State Income Tax | 2.5% flat | Flat tax effective January 1, 2023 |
| Arizona Income | AZ Rate |
|---|---|
| All income | 2.5% flat (from January 2023) |
Arizona has the lowest flat income tax rate among states with an income tax. Withholding remitted to ADOR via A1-QRT (quarterly) or monthly schedule. Annual A1-R reconciliation. No additional municipal income taxes in Arizona.
Final Pay: Involuntary termination: final pay within 7 business days or by the next regular payday (whichever is sooner). Voluntary resignation: next regular payday. Accrued vacation payout: employer written policy governs. Clear written forfeiture policy enforceable in Arizona.
WARN Act: Federal WARN Act applies (100+ employees). No separate Arizona WARN law.
Arizona enacted a flat 2.5% income tax rate effective January 1, 2023 — one of the lowest in the US. The prior graduated brackets and Prop 208 surtax have both been eliminated. Withholding is straightforward: 2.5% of all taxable wages, remitted to ADOR. Rippling applies the 2.5% flat rate automatically.
Arizona’s EPST under the Fair Wages and Healthy Families Act requires: 40 hours paid sick time/year (15+ employees); 24 hours paid sick time/year (under 15 employees). Accrual: 1 hour per 30 hours worked. Sick time usable for employee or family member illness, domestic violence, sexual violence, or stalking. Rippling tracks EPST accrual for Arizona employees.
Arizona has no state-mandated paid family leave or SDI. Employees rely on federal FMLA (12 weeks unpaid, 50+ employee employers) and any employer-provided paid leave policies. Arizona has no SDI contribution. Phoenix and Tucson do not have separate minimum wage ordinances above state — though Flagstaff does.
Arizona’s minimum wage is $14.35/hour (January 2024, indexed to CPI). Tipped employees: $11.35/hour (tip credit applies). Flagstaff has a higher local minimum. All Rippling payroll employees are paid at or above the applicable minimum.
