Equipment rental
In short
Renting equipment for the contractor's own use is taxable. The lessor owes the tax, and the contractor pays it as part of the price.
In full
Where a contractor rents equipment or tools for use in its own business, the rental is subject to transaction privilege tax unless a statutory deduction applies. It makes no difference whether the equipment is used on a Modification project or an MRRA project.
Who owes it is the part worth being precise about. Transaction privilege tax is a tax on the business activity of the person conducting it, so the lessor of the equipment is the taxpayer, reporting under the personal property rental classification. ADOR states that the lessor may pass the economic expense of the tax to the contractor, which is what appears on the invoice.
So a line on a rental invoice reading as tax is the lessor's tax being recovered, not the contractor's liability. The contractor has no filing obligation arising from it.
Rented equipment is also not materials. It is not incorporated into the real property, it is not bought exempt on a contractor's exemption certificate, and it generates no retail equivalent under business code 315.
Where the rental cost is charged on to a customer as part of a contract, it is part of that contract's gross receipts and is treated as the contract is treated.
ADOR Contracting FAQs; A.R.S. § 42-5071