Glossary · Licensing & Bonding
Annual Bond Exemption
In short
Documentation to city building authorities that a contractor has met the bonding requirement. Not an exemption a contractor applies for, and it expires every July.
In full
The Annual Bond Exemption is not an exemption from tax and, despite the name, is not something most contractors apply for. It is the Department's documentation to city building authorities that a contractor has satisfied the bonding requirements of A.R.S. § 42-5007, or is exempt from them.
It is delivered as a list, not a certificate. The Department no longer issues paper Annual Bond Exemption Certificates to in-state contractors in good standing; it provides each city an electronic listing of qualified exempt contractors, and the city checks that list when a permit is sought.
The timing is fixed and unforgiving. The exemption expires on 31 July, and the new list reaches the cities on 1 August.
The consequence of not appearing on it is a permitting problem before it is a tax problem. Where a contractor is not on the list, the city will not issue a building permit without certification from the Department that the bonding requirement has been met or that the contractor is exempt for the project.
The Department states that it may issue an exemption to qualified contractors based on timely reporting and length of time in Arizona.
A.R.S. § 42-5007; ADOR Bond for Contractors; ADOR Publication 539 (revised August 2025)