Sale-and-installation
In short
Selling goods is retail; selling goods and installing them into real property is contracting. Arranging the installation is enough to cross the line.
In full
The same business can be a retailer on one transaction and a contractor on the next, and what decides it is whether the seller is paid for installing the goods into real property.
ADOR's example is flooring. A seller who provides the flooring and arranges to have it installed is no longer a retailer but a contractor, and the amount paid for both the flooring and the installation is taxed under construction contracting. The same seller who sells the flooring without arranging the installation, and receives no payment for it, is a retailer.
Arranging is the trigger. A seller who hires and pays the installer has crossed the line even though someone else does the work.
Having a showroom does not make a business a retailer. ADOR states that a contractor with samples of materials in a showroom, whose customers choose materials the contractor then installs, is a contractor when it sells and installs the materials into real property.
The boundary is real property, not installation as such. A person who sells tangible personal property and installs it into something that is itself tangible personal property — ADOR gives a car or a recreational vehicle — is taxable under the retail classification, and installation kept separate from the retail sale on the invoice and in the books and records is a service rendered in addition to the retail sale, which is exempt under that classification.
Once the activity is contracting, the contracting rules apply in full, including whether the contract is MRRA or Modification.
One threshold underlies all of this and is easy to miss. A.R.S. § 32-1121(A)(4) exempts a retailer from Registrar licensing where it installs what it sells and the total value of the transaction, labor and materials together, does not exceed $1,000. Because § 42-5075(A) excludes from prime contracting any work performed by a person not required to be ROC-licensed, a small sale-and-install transaction can be outside contracting entirely and taxable under retail — the opposite result from the same facts at a higher price.
ADOR Contracting FAQs; A.R.S. § 42-5061; A.R.S. § 42-5075(A); A.R.S. § 32-1121(A)(4)