Do contractors charge sales tax in Arizona?

Arizona does not run an ordinary sales tax on contractors. It taxes the contractor's own GROSS RECEIPTS, and the charge is called Transaction Privilege Tax. It is a tax on the business, not a tax collected from the customer, so it applies to the whole job — including amounts a contractor recharges "at cost", such as a permit fee. Arizona also has county, city or special-district rates on top of the state rate, so the rate depends on where the job site is, not where the contractor is based. Source: A.R.S. §42-5075 (prime contracting classification); A.R.S. §42-5074 / MRRA treatment for maintenance, repair, replacement and alteration.

WhatArizona
Contractor’s default roleGross receipts (Transaction Privilege Tax)
What the charge is calledTransaction Privilege Tax
Local rates on topYes — sourced to the job site
Capital improvement exempt to the customerNo

Where this gets more complicated

Two regimes with a threshold between them. "Modification" work is taxed on the prime contractor's gross receipts (with a 35% standard deduction); MRRA work is not — the contractor pays tax on materials instead. The split turns on the scope and value of the project and cannot be decided from the line class alone.

Source

A.R.S. §42-5075 (prime contracting classification); A.R.S. §42-5074 / MRRA treatment for maintenance, repair, replacement and alteration.

Read the statute in the Arizona Revised Statutes (Arizona Legislature): azleg.gov.

This is a summary of a state’s published guidance, not tax or legal advice. Rates and rules change, local jurisdictions add their own, and the treatment of a specific job depends on the contract and the work. Check the citation and speak to a CPA or a state tax adviser before relying on it.

How Seayora uses this rule

Seayora resolves this rule on every invoice a contractor raises — per line, from the job site’s own address — and prints the rate, the jurisdiction and this citation on the document itself, so the estimate a customer accepts is the invoice they are billed. Where the rule is more nuanced than a single answer, Seayora refuses to guess a total rather than quoting a confident wrong one.

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