MRRA
In short
Contracting work on existing property that is excluded from prime contracting tax. The tax applies to the materials rather than to the contract.
In full
MRRA stands for maintenance, repair, replacement and alteration. It is the treatment that applies where a contract is outside the prime contracting classification, and the consequence is that tax attaches to the materials the contractor buys rather than to the amount the customer pays. Labor is outside the tax base entirely.
A.R.S. § 42-5075(P) sets three conditions, and all three have to hold.
The contract must be **with the owner** of the real property or improvements. That is the condition most often missed, and it is wider than it sounds — (S)(8) defines owner to include a tenant, a property manager, an agent of the title holder, and anyone with authority to authorize the work. It also deems a subcontractor hired down a chain from an owner to have been hired by the owner, so the exclusion survives the chain.
The work must be maintenance, repair, replacement or alteration **of existing property**. Work where nothing previously existed cannot be MRRA at all.
And the contract must not include modification activities, except that a de minimis amount does not subject the contract or any part of it to tax. The statute sets no figure; ADOR supplies the 15% test.
Maintenance, repair and replacement are MRRA at any contract size. Alteration is MRRA unless the contract amount is **more than** the applicable threshold — 25% of the most recent full cash value on residential property, or $750,000 on everything else. A contract at exactly the threshold keeps its alteration status, because the statute removes it only above.
The tax on the materials is not part of this section. A.R.S. § 42-5075(P)(1) points at § 42-5008.01, which imposes an amount equal to retail tax on tangible personal property incorporated into an MRRA project.
A.R.S. § 42-5075(P), (P)(1), (S)(1)(a), (S)(1)(b), (S)(8); A.R.S. § 42-5008.01; ADOR MRRA Contracting