Retail equivalent
In short
An amount equal to retail tax, remitted by a licensed contractor on materials used in MRRA work that were bought tax free.
In full
Retail equivalent is not retail tax. It is an amount equal to the tax a seller would have been required to pay, owed by the contractor rather than collected from a customer. Nothing in the phrase says that, which is why contractors mistake it for tax they are charging someone.
It arises on MRRA work. A licensed contractor gives a materials vendor a Form 5000 and buys materials tax free. When those materials are used on an MRRA project, the contractor remits the retail equivalent instead.
The mechanics are specific and none of them follows from the name. The gross cost of the materials is reported — markup is not included. Business code 315 carries it. The rate is sourced to the job site rather than to the contractor's own place of business. It is reported in the tax period in which the materials are used, not the period in which they were bought.
The statutory basis is A.R.S. § 42-5008.01(A), which makes a prime contractor, or a subcontractor working under that prime's control, liable for an amount equal to any tax a seller would have been required to pay, where property bought under the contractor exclusion is incorporated into a project described in § 42-5075(P).
The alternative is to pay retail tax to the vendor at the point of purchase. A contractor performing only MRRA work is not required to hold a TPT license, and an unlicensed contractor has no second option — paying at the register is the only route available.
A.R.S. § 42-5008.01(A); ADOR MRRA Contracting