Modification
In short
Contracting work taxable under the prime contracting classification, covering new construction and alterations at or above the applicable threshold.
In full
Modification is the activity the prime contracting classification taxes. Where a contract is Modification, tax applies to the contract amount rather than to the materials.
A.R.S. § 42-5075(S)(6) defines it as "construction, grading and leveling ground, wreckage or demolition." The definition carries no qualifier about what the work is preparing for and no threshold of any kind.
That flatness is the point, and it is where intuition goes wrong. Grading a lot is Modification whether or not anything is built afterwards. Demolishing a structure is Modification whether or not something replaces it. A contractor who reasons that grading is only taxable when it precedes construction has read a condition into the statute that is not there.
Three carve-outs follow, and all three run through subsection (P) rather than standing on their own. Modification does not include any project described in (P) — an MRRA contract with the owner. Subdivision (b) reads, as written: "Any wreckage or demolition of existing property, or any other activity that is a necessary component of a project described in subsection P." Whether the necessary-component qualifier reaches the demolition as well as the other activity is not settled by the punctuation; ADOR supplies the reading that it does, and the MRRA Contracting page applies it that way. And it does not include mobilization or demobilization related to such a project, which the statute illustrates as the erection or removal of temporary facilities for the people working on it.
So the same demolition is Modification standing alone and MRRA as the first step of a qualifying repair. What decides it is the contract it belongs to, not the work itself.
An alteration to existing property becomes Modification where the contract amount is more than the applicable threshold. Below or exactly at the threshold, the same work is MRRA.
The statute also defines the verb at (S)(7): to modify is to make a modification or cause one to be made. Causing it is enough, which is how a prime contractor who performs nothing itself is still within the classification.
A.R.S. § 42-5075(S)(6), (S)(7), (S)(1)(a), (S)(1)(b), (P); ADOR Modification Contracting