Glossary · Thresholds & Valuation
Contract amount
In short
The figure the alteration threshold is tested against: the contract price on a contract that is all alteration, and the alteration charges alone on a mixed contract.
In full
The dollar figure compared against the alteration threshold. On a contract that is only alteration work, it is the contract price.
On a contract that mixes alteration with maintenance, repair or replacement, only the alteration charges are compared with the threshold. A.R.S. § 42-5075(S)(1)(a) and (S)(1)(b) test "the contract amount," and ADOR Tax Policy stated in writing on September 30, 2026 that the phrase refers to contracts that are purely alteration. A mixed contract is tested on its itemized alteration charges, as ADOR's Evaluating Mixed Construction Contracts worksheet does at steps 3a and 3b and the MRRA Contracting page does in testing "the alteration amount." Maintenance, repair and replacement carry no threshold, so their charges never count toward it.
ADOR's worked example: a residential parcel with a full cash value of $500,000, so a threshold of $125,000, and a $150,000 contract holding $100,000 of alteration and $50,000 of replacement. The $100,000 of alteration is under the threshold, so the contract does not convert to Modification, and the $50,000 of replacement does not push it over.
The answer covers the commercial $750,000 threshold as well as the residential percentage.
A change order that directly relates to the scope of work of the original contract is treated as part of that contract, and the contract amount includes any amount attributable to it. The threshold is therefore retested as change orders arrive rather than settled once at execution.
A.R.S. § 42-5075(S)(1)(a), (S)(1)(b), (S)(1)(e); ADOR Evaluating Mixed Construction Contracts worksheet, steps 3a and 3b; ADOR MRRA Contracting page; ADOR Tax Policy information letter, 2026-09-30