Owner-Builder
In short
An owner who improves property and keeps it. The city tax arrives twenty-four months after the work is substantially complete, and only on what was built by contractors the owner released from liability.
In full
An Owner-Builder is an owner of real property who improves it and does not sell it — an owner who acts as their own contractor, or hires contractors and takes the tax liability on themselves. The tax is imposed by Arizona cities and towns under Model City Tax Code § 417. There is no state or county Owner-Builder classification.
The distinction from a Speculative Builder is the sale and the clock. An owner who improves property and sells it is a Speculative Builder. An owner who still holds it twenty-four months after the improvement is substantially complete becomes liable as an Owner-Builder at that point.
The base is narrower than it first appears, and this is the part most easily got wrong. It reaches two things: the gross income realized by those construction contractors to whom the owner-builder gave a written declaration that they were not responsible for the taxes, and the purchase of tangible personal property incorporated into the improvement, computed on the sales price. Work done by a contractor who was never given such a declaration — and who therefore paid the tax itself — is not in the owner-builder's base.
In practice the declaration is Form 5005 and the exempt materials purchase is Form 5000. A TPT licensed owner who hands contractors a Form 5005 and buys materials exempt on a Form 5000 has done both of the things that create the liability, and the liability arises at the end of the twenty-four months.
All amounts subject to the tax take a thirty-five percent deduction. For periods from and after July 1, 2008, the portion attributable to the actual direct costs of providing architectural or engineering services incorporated in a contract is outside the tax.
State and county obligations do not disappear while the clock runs. Whatever is due under the retail and prime contracting classifications is still due when it is due.
Model City Tax Code § 417(a), (b), (c), § 415(c)(2); ADOR Speculative Builder