Scottsdale taxes local advertising at 1.70 percent. Phoenix taxes the same activity at 0.50 percent, and Arizona taxes it at nothing. That gap is more than three to one between two cities in the same valley, and it lands on the sale of advertising placement rather than on what an agency charges for its own labor, which is the part that gets misreported most often. Whether any of it reaches digital work at all is genuinely unsettled in the published sources.
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Arizona doesn't tax advertising income. Cities do, and the two largest in the East Valley are more than three times apart. Scottsdale taxes local advertising at 1.70 percent under business code 018. Phoenix taxes the same activity at 0.50 percent. Both figures come from the Department of Revenue's city profiles, with rates stated current as of 1 July 2025.
An agency's own fee generally isn't in the taxable base. The Model City Tax Code advertising section, which Scottsdale and Phoenix both adopt, says commissions and fees "retained by an advertising agency shall not be includable in gross income from 'local advertising'."
So the tax lands on the sale of advertising placement, not on what the agency charges for its labor. Those get conflated constantly.
The classification covers "local advertising" and carries six enumerated exclusions, none of them about digital media. Its illustrative examples run to twelve traditional categories: retail, financial institutions, real estate, healthcare, hotels, brokers, nonprofits, political activity, restaurants, services, coupons and entertainment events. Internet, website and online advertising appear nowhere in the list.
Phoenix's own definition pulls the other way, describing advertising as "by billboards, direct mail, radio, television, or any other means" and adding that "all delivery or disseminating of information directly to the public for consideration shall be considered advertising."
We read the published city and state sources and they don't answer whether an SEO retainer or a web build falls inside the classification. Anyone budgeting on the assumption that it doesn't is guessing, and so is anyone assuming it does.
Phoenix has no general business license. It licenses enumerated taxable activities, and a firm with no taxable activity registers for nothing.
Scottsdale issues a Business Registration (Service) License, a category with no Phoenix equivalent. A consulting-only firm that sells no advertising placement can therefore end up registered in Scottsdale and unregistered a few miles west.
Published fee figures for it conflict. The city's own explainer on the 2015 tax code conformity update says the update "eliminates a $12 application fee," while the application form currently posted charges $12 plus a $50 annual fee. Two city documents, two answers, so we're not printing a number. Scottsdale Tax and License is the place to settle it.
A lot of these firms are one or two people in a house, and Scottsdale regulates that by zoning standard rather than by a separate permit. One standard bites harder than the rest: "no one who does not reside in the dwelling unit may be employed by the home occupation."
The rest of the set is consistent with that. The home occupation "must be a secondary use of the dwelling unit and shall not alter the exterior of the building or affect the residential character of the neighborhood." No exterior display, storage, signage or other outward indication. No use of the carport, garage or accessory buildings. "There shall be no commodity sold or exchanged upon the premises." No mechanical equipment beyond what domestic, hobby or standard office use would involve. No inordinate pedestrian or vehicle traffic.
Hiring a second person who lives somewhere else is the point at which a Scottsdale home operation stops fitting the standard.
Two Scottsdale specifics drive these: the city tax rate on advertising, and a registration category Phoenix does not have.
1.70 percent on local advertising under business code 018. Phoenix taxes the same activity at 0.50 percent, and Arizona does not tax advertising income at state level. Both city figures come from the Department of Revenue's city profiles, stated current as of 1 July 2025.
Generally not. The Model City Tax Code advertising section, which Scottsdale and Phoenix both adopt, says commissions and fees retained by an advertising agency shall not be includable in gross income from local advertising. The tax lands on the sale of advertising placement rather than on the agency's labor.
The published sources do not answer it. The classification covers local advertising with six enumerated exclusions, none about digital media, and its twelve illustrative examples are all traditional categories with no mention of internet, website or online advertising. Phoenix's own definition pulls the other way, covering advertising by any other means. Anyone budgeting on the assumption that it does not apply is guessing, and so is anyone assuming it does.
It may. Scottsdale issues a Business Registration (Service) License, a category with no Phoenix equivalent, so a consulting-only firm selling no advertising placement can be registered in Scottsdale and unregistered a few miles west.
Two city documents disagree, so no figure is printed here. The city's explainer on the 2015 tax code conformity update says it eliminates a $12 application fee, while the application form currently posted charges $12 plus a $50 annual fee. Scottsdale Tax and License is the place to settle it.