Subcontractor
In short
A contractor working under a prime rather than contracting with the owner. A subcontractor performing MRRA work remains an MRRA contractor.
In full
A subcontractor performs work under another contractor rather than contracting directly with the property owner. Nothing about that position is itself a tax answer — two separate provisions can take a subcontractor out of the prime contracting classification, and they work differently.
**A.R.S. § 42-5075(D)** is the demonstration route. A subcontractor is not subject to tax if it can demonstrate two things: that the work was "within the control of" a prime contractor or a manufactured building dealership, and that the prime or dealership is liable for the tax on the income from which the subcontractor was paid. Both elements are required, and the burden rests with the subcontractor.
**A.R.S. § 42-5075(E)** is the certificate route, and it is stronger. Amounts received are excluded from the contractor's gross income where the person who hired it executes and provides a certificate stating that they are a prime contractor and liable for the tax. Form 5005 is the Department's prescribed form.
What makes (E) worth more than (D) is its last sentence. If the person who gave the certificate turns out not to be liable as a prime contractor, that person is nevertheless deemed to be the prime contractor in lieu of the contractor, and is taxed on the receipts. The subcontractor's protection therefore does not depend on the certificate having been accurate — liability follows the signature. Where the contractor has reason to believe the information is erroneous or incomplete, the Department may disregard the certificate.
On an MRRA contract the question does not arise in the same form. A subcontractor performing MRRA work is an MRRA contractor and owes tax on the materials it buys and incorporates. Form 5088 is the notice recording that responsibility, and § 42-5075(S)(8) deems a subcontractor hired down a chain from an owner to have been hired by the owner, so the MRRA exclusion reaches it.
A.R.S. § 42-5075(D), (E), (S)(8); A.R.S. § 42-5008.01