Contracting Tax

Who Is Taxed?

Construction contractors, speculative builders, and owner builders, except for remediation contracting, are subject to the contracting tax.

Examples of taxable contracting activities include, but are not limited to:

• Construction or demolition of a building
• Road construction
• Land excavation and landscaping
• Construction for government agencies (federal, state & local)
• Construction for schools, churches and nonprofit organizations
• Installation of permanently attached equipment
• Sale and installation of floor covering
• Home remodeling (including painting, wiring, plumbing, wallpapering, etc)

Procedures for Sales Tax Payment

To apply for a Privilege Tax License please click on the link below.

https://azdor.gov/transaction-privilege-tax/tpt-license/applying-tpt-license 

Factored Sales Tax

You may choose to include sales tax in the total contract price rather than show the tax separately. If so, you can use factoring to "back into" the tax included in your gross sales. There are many variations on Factoring Formulas depending on applicable tax rates.

If you choose to separately bill and collect the sales tax, the tax collected may exceed the actual tax liability due to rounding. Any excess city tax that is collected must be remitted.

Last Updated: 9/16/2020