|
||||||||||||||||||
|
|||||||||||||||||||
Arizona Transaction Privilege Tax
This publication is for general information about Arizona transaction privilege tax on contracting activities. The Arizona transaction privilege tax is commonly referred to as a sales tax. However, the tax is on the privilege of doing business in Arizona and is not a true sales tax. For complete details, refer to the Arizona Revised Statutes and the Arizona Administrative Code. In case of inconsistency or omission in this publication, the language of the Arizona Revised Statutes and the Arizona Administrative code will prevail.
While reading this brochure, please be aware that the definitions of certain terms, such as 'Owner-builder' and 'Sub-contractor', are different under the Arizona Revised Statutes than those commonly accepted within the industry.
Prime contractors are subject to transaction privilege tax under the prime contracting classification. A prime contractor is one who performs, coordinates or supervises construction work, including contracting with any subcontractors. The prime contractor is the person responsible for the complication of the contract.
A prime contractor who only furnishes labor in the performance of contracting work is subject to the tax as well as one who furnishes both labor and materials.
Examples of taxable contracting activities include:
What Is The Tax Base For Prime Contractors?
The tax base for the prime contracting classification is 65% of the gross proceeds of sales or gross receipts derived from the job.
The determination of whether a contractor is a taxable prime contractor or a nontaxable subcontractor depends on the facts surrounding each individual project. An individual contractor can be a taxable prime contractor on the job and a nontaxable subcontractor on the next job.
In order to be a nontaxable contractor on an individual project or job all of the following factors must be present:
There is a retail tax on all construction materials purchased directly by owner-builders since they are basically constructing a project for their own use or for rental purposes.
Subcontractors are considered "Prime" contractors if they do work for, or receive payment from, an owner-builder.
The retail tax does not apply to the sale of materials to a taxable prime contractor or a subcontractor if the materials become a permanent part of the construction. The retail or rental tax does apply to construction machinery and equipment sold or leased to the contractor, or any other item that is not incorporated into the project. The retail tax also applies to materials purchased directly by an owner-builder.
The state tax rate is 5% on prime contracting. Cities and countries establish their own tax rates. For purposes of the prime contracting classification, the city and county taxes apply at the location where the contracting activity is performed.
Most larger cities license and collect tax independently. If you are unsure whether the city or state collects the city tax, check the Transaction Privilege Tax Rate Tables, available from the Department of Revenue. The tables include the rates from the cities who participate in the state collection system and the telephone numbers of cities that collect their own taxes. Individual city and county ordinances also provide more information on the tax.
Income from prime contracting activities is reported under business class 15. Most taxpayers are required to report on a monthly basis. Form ST-1 is used to report and remit transaction privilege tax to the Arizona Department of Revenue. Call (602)542-4260 for forms, or write:
FormsNOTE: State and country tax rates are combined for ease in reporting. City taxes are reported separately. See the form ST-1 and instructions for details.
Prime contractors do not have to pay county taxes on income from contracts entered into before the effective date of the county tax. This is true, except in contracts where the contractor is entitled to recover the amount of the tax from a purchaser. Such contracts must be pre-qualified and pre-approved by the Department of Revenue.
Contractors may elect to report and pay taxes based on either the "cash receipts" or "accrual" method when applying for their transaction privilege tax license. A contractor who elects the cash method reports and pays the tax for the month in which cash payments are actually received. A contractor who elects the accrual method reports and pays the tax for the month in which the income is accrued, without regard to when payment is received.
You may choose to include transaction tax in the total price, rather than show it as a separate charge. If you choose to include the tax in the total price of an item, you may factor out the tax. There are many variations on factoring formulas depending on city taxes, county taxes or differences in allowable city tax deductions. Any factoring formula may be used if it results in a tax amount equal to the tax calculated using the separate and distinct item of charge method.
The total amount of tax collected must be remitted to the department. If tax is collected in excess of the tax liability for the reporting period, the excess tax must be sent to the department.
Prime contractors are:
If you are a new or out-of-state contractor, you must submit a bond to cover your future tax liabilities before you can be issued a transaction privilege tax license. For more information on bonding, please see the "Taxpayer Bonds" brochure.
For additional information call:
(602) 255-2060 in Phoenix or outside Arizona
(602) 628-6421 in Tucson
1-800-352-4021 or 1-800-391-0256 for the hearing impaired TTD user
or write:For additional contracting information contact:
The Registrar of Contractors
 |
||
| © 2007 |
|
480-354-1040 Fax 480-354-1041 Toll Free 877-945-1040 |
|
|
||
|
Securities offered through |
||
