This article is based on public records posted by the Town of San Tan Valley. All tax rates, classifications, and timelines described reflect discussions held during a work session and are subject to change. No TPT code has been formally adopted.
SAN TAN VALLEY, AZ — On March 4, 2026, the San Tan Valley Town Council voted unanimously to approve two administrative agreements required to collect a Transaction Privilege Tax (TPT). The votes signal that the town is moving forward with establishing its own local sales tax. The earliest the council may vote to adopt the TPT code is April 19, 2026.
The March 4 action followed a nearly three-hour work session on February 19 in which the council, guided by Tax Policy Analyst Lee Grafstrom of the League of Arizona Cities and Towns, worked through the classifications and rates that will make up the town’s tax code. The town posted a Notice of Intent on February 18, 2026, opening the mandatory 60-day public notice window. Grafstrom’s role is to draft that code based on the council’s direction. “The purpose of what we’re doing here today is in order for you to adopt a transaction privilege tax code, someone has to write that code. That will be me. In order for me to write that code, I need to know what you want in it,” he said. He walked council through the major tax classifications and about 28 available code options, making recommendations on each.
Utility Tax Revenue: What Shifts to San Tan Valley
Councilmember Gia Jenkins noted that some residents currently pay City of Mesa tax on their natural gas bills. Grafstrom confirmed the shift would be automatic: “When you guys adopt your own tax, you’ll start paying San Tan Valley tax. No longer pay Mesa tax.”
A similar situation applies to water service. Queen Creek currently services some San Tan Valley residents and charges them Queen Creek tax. Grafstrom explained: “Queen Creek is servicing some of your residents with their water. So they’re charging them their fees, and they are charging them Queen Creek tax as well, because they have that option to tax the people who are outside their boundary. Once you stand up a utilities tax, you will start collecting that tax. So Queen Creek will start charging them San Tan Valley tax, and they’ll have to pay you.” Residents currently paying Queen Creek tax on those water bills would not be double-taxed. “You’re not going to pay both,” Grafstrom said.
How the San Tan Valley TPT Rates Were Determined
Grafstrom compared tax rates across neighboring jurisdictions. Nearby retail sales tax rates included Apache Junction at 2.4%, Coolidge at 3%, Florence at 2%, Gilbert at 2%, Maricopa at 2.5%, Mesa at 2%, and Queen Creek at 2.25%.
Grafstrom opened with a recommendation of 2% flat across all classifications. “My recommendation to you is you should start with a tax rate of 2%,” he said. “Run 2% across every classification, and then we can adjust it from there later down the line.” However, several council members pushed back, noting that Queen Creek is the most direct neighbor. Councilmember Rupert Wolfert argued that 2.25% would be a better baseline, matching Queen Creek. “Our lines sort of blur,” he said. “I don’t know how anyone can” tell the two apart. Town Manager Brent Billingsley leaned toward 2% to attract businesses but was not opposed to 2.25%.
Grafstrom said he would prepare the initial draft using 2.25% as a working baseline, though council could change the rate before final adoption. He noted: “The first question you need to ask yourself is how much are we going to charge? Theoretically, you want to set your rate wherever you need it to be in order to collect the amount of money you need. The reality is every city and town looks at their neighbor and goes, ‘What are they doing?'”
Construction Contracting Classifications: 4.25% in Initial Draft
Grafstrom said he would draft the code using 4.25% for the three construction contracting classifications, after council members expressed support during the discussion.
Later in the session, during a detailed walkthrough of individual classifications, Grafstrom explained what the speculative builder classification — one of the three construction contracting classifications — actually taxes. Unlike prime contracting, which taxes the contractor during the building process, the speculative builder tax is based on the selling price of the property at the time of its first sale. Grafstrom noted that of the three construction contracting classifications, speculative builder would likely be “way bigger for you than any other.”
Finance Director Gabe Garcia and Town Manager Billingsley both emphasized that construction revenue is one-time money and should not fund ongoing operating expenses. Grafstrom agreed, referencing the 2007–2010 recession. He said cities that relied on construction revenue for operations saw that revenue collapse when housing markets turned.
Billingsley described how Maricopa formalized that policy as a council resolution — treating construction revenue as one-time money, set aside rather than spent on ongoing operations. The resolution established the funds as a rainy day fund for infrastructure, with the intent that future councils would not redirect them. He said the city was able to purchase two large properties for roughly ten cents on the dollar from developers who went broke before building their subdivisions, and built city hall and a police station for approximately a quarter of what it would cost today.
Grafstrom Recommends Rates Across All Classifications
Grafstrom cautioned council against concentrating the tax burden on any single category. “Ideally, you’re going to tax everybody a little bit, as opposed to just these people a whole lot,” he said. “Because eventually those people will find a way down at the legislature to get themselves taken out of the list.”
He recommended establishing rates across all available classifications, even where current revenue is expected to be small. Billingsley noted that San Tan Valley is unlikely to have enterprise funds such as a town-owned water or sewer utility, and said the town should take advantage of the revenue classifications available to support its population.
Hotels and Short-Term Rentals
San Tan Valley currently has no hotels. Grafstrom recommended adopting hotel and transient lodging classifications, pointing to the presence of Airbnb and VRBO properties in the community.
Council indicated that both the hotels classification and the additional tax upon transient lodging should start at 4.25% in the initial draft — 2% above the standard retail rate. Grafstrom noted that visitors are generally insensitive to local tax rate differences when choosing where to stay.
Grafstrom noted that Arizona law limits how much higher hotel tax rates can be set above the standard retail rate without triggering requirements to dedicate the excess revenue to tourism promotion. As long as the hotel rate stays within that threshold, the town can spend the revenue however it chooses.
Other Classifications Discussed
Grafstrom walked through a number of additional classifications during the session. Several are worth noting for residents.
Use Tax. Grafstrom strongly recommended the town adopt a use tax, calling it a protection for local retailers. The use tax ensures that residents who buy goods from outside the state — such as a vehicle purchased out of state — still pay San Tan Valley tax on that purchase, collected by the Motor Vehicle Division at registration. “You absolutely should have a use tax,” he said. Grafstrom noted the use tax rate must match the retail rate.
Rental, Leasing, and Licensing for Use of Real Property. This classification covers the rental and licensing for use of non-residential real property. Grafstrom noted that as of January 1, 2025, the state preempted cities and towns from taxing residential rentals, so only non-residential rentals remain taxable under this classification. Grafstrom cited office space and storage units as examples. Billingsley raised RV storage, which Grafstrom said falls under this classification, though he noted whether it is treated as rental of real property or licensing for use depends on how each individual facility operates. Billingsley noted that San Tan Valley has a significant number of RV storage facilities. Grafstrom recommended setting the rate at 2.25%, saying “you want your rental to stay in line with your retail, as best you can” — consistent with the rate already established for other classifications and with the neighboring comparison cities reviewed during the session.
Feed and Wholesale. Grafstrom recommended the town adopt this classification, which taxes the sale of livestock feed and agricultural chemicals. Arizona law generally requires cities and towns to align their retail tax classifications with the state’s. Grafstrom noted that feed and wholesale is one of several exceptions — cities and towns are still permitted to tax it even though the state does not. During the discussion, an attendee mentioned that the area has hay brokers and farmers who would fall under this classification. Billingsley, drawing on his experience in Florence, also noted the classification’s relevance to the area. Grafstrom did not specify a rate for this classification during the session. If included in the draft, it would likely follow the general baseline rate used for other classifications, though the council did not explicitly discuss the rate.
Amusements. Grafstrom recommended an option to tax health-related activities, including gym memberships, health spas, karate studios, swim schools, and dance studios. He noted that given San Tan Valley’s growth pattern, gyms and fitness facilities would likely appear in the community before more traditional retail destinations.
Telecommunications. This classification covers cell phone bills, which Grafstrom described as the largest revenue source within the category. He recommended the standard rate of 2.25%. He noted that cable TV and streaming services such as Netflix and Sling are not taxable under this classification, though individual movie or event purchases made through those platforms may be taxable under other classifications.
Food Tax: Deferred to a Future Session
The question of taxing food was raised near the end of the meeting but not resolved. Attorney Allen Quist recommended the council address it in a future executive session to work through the legal considerations in more detail. Grafstrom indicated he would include food in the initial draft; the council can make adjustments before final adoption.
How the San Tan Valley TPT Can Be Changed
Councilmember Jenkins asked whether future rate changes would require a public vote. Grafstrom’s answer was unequivocal: no. He noted that as a town, a simple council majority can change any rate at any time — and with seven council members, that means four votes.
Franchise fee rates are a separate matter, Grafstrom said. Those always require a public vote. TPT rates, by contrast, remain entirely within the council’s authority to raise, lower, or restructure at any time. Grafstrom cautioned that cutting a rate is easy, but said raising one brings people out in opposition.
Adoption Timeline
Arizona law requires the town to post public notice at least 60 days before voting to adopt a TPT. The town posted that notice on February 18, 2026, meaning the earliest the council may vote is April 19, 2026. The law also requires the town to notify existing businesses of the upcoming tax. Grafstrom said he would contact the Arizona Department of Revenue to begin identifying those businesses, but noted that San Tan Valley does not yet exist in the Department of Revenue’s system, and said obtaining a usable business list presented unresolved logistical challenges.
Grafstrom said the goal would be to implement the tax July 1, 2026, aligning with the start of fiscal year 2027. He said an August 1 start remains workable if the timeline slips. Once adopted, the council will receive an ordinance for required public notice and a separate approximately 120-page resolution containing the full tax code body.
Council Approves Two Agreements to Administer the TPT
At its regular meeting on March 4, 2026, the council took two formal votes to put the administrative framework for the TPT in place.
By unanimous vote, the council adopted Resolution No. 2026-09, approving an Intergovernmental Agreement with the Arizona Department of Revenue for the administration, collection, audit, and licensing of transaction privilege and affiliated excise taxes.
The council also unanimously adopted Resolution No. 2026-10, approving an agreement with the League of Arizona Cities and Towns for assistance with municipal tax administration and authorizing the mayor to execute the agreement on behalf of the town.
For official information on the San Tan Valley Transaction Privilege Tax, residents can visit santanvalley.gov.
