Retail classification
In short
The classification taxing sales of tangible personal property. It reaches contractors twice — as buyers of materials, and as the fallback when prime contracting does not apply.
In full
The retail classification is comprised of the business of selling tangible personal property at retail. The tax base is the full gross proceeds of sales or gross income, with none of the reduction prime contracting gets.
It reaches a contractor in three ways.
Materials. On an MRRA project the tax attaches to materials rather than to the contract. Where the contractor pays the vendor at the register, the vendor is the party taxed under the retail classification and the contractor is simply the purchaser. Where the contractor buys exempt instead, what the contractor later remits is an amount equal to retail transaction privilege tax under A.R.S. § 42-5008.01 — the retail equivalent — which is a separate liability, not retail tax itself.
Work outside prime contracting. A business not required to be licensed by the Registrar of Contractors is excluded from prime contracting, but ADOR states the business may still be taxable under another classification, retail among them.
Selling against installing. A retailer who sells materials and also arranges for their installation into real property is a contractor for that transaction. Selling the same materials without arranging installation keeps it retail. Installation into tangible personal property rather than real property — a vehicle, for instance — stays retail, and installation labor kept separate on the invoice and in the books is a service rendered in addition to the retail sale.
Reported under business code 017.
A.R.S. §§ 42-5061(A), 42-5008.01; ADOR Contracting FAQs