ARIZONA HOUSE OF REPRESENTATIVES Fifty-fourth Legislature Second Regular Session

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HB2404: TPT; prime contracting; exemptions; certificates

Sponsor:  Representative Cobb, LD 5

Committee on Ways & Means

Overview

Limits the valid period of an exemption certificate, prescribed by the Department of Revenue (DOR) for transaction privilege taxpayers to document exempt sales, to a period of one year. Modifies the definition of alteration and modification under the prime contracting classification.

History

Current law does not require the DOR to prescribe an exemption certificate with an expiration date for transaction privilege taxpayers to use to document exempt sales. (A.R.S. § 42-5009)

Statute defines alteration as an activity or action that causes a direct physical change to existing property with separate provisions for residential and commercial property. Also, the law allows for the original contract amount to be exceeded by no more than 25% if the work performed qualifies as an alteration. Modification is currently defined as construction, grading and leveling ground, wreckage or demolition. (A.R.S. § 42-5075.R)

Provisions

1. Provides that an exemption certificate, from a prime contractor or a subcontractor subject to tax on under the prime contracting classification, supplied to a retailer is valid for a period of not more than one year. A new certificate may be executed. (Sec. 1)

2. States that DOR shall prescribe a form for a certificate to be used by a prime contractor that is subject to tax under the prime contracting classification for which the purchase of the tangible personal property is excluded from the retail tax base. (Sec. 2)

3. Provides that the certificate above is valid for a period of not more than one year and that a new certificate may be obtained. (Sec. 2)

4. Provides that the certificate received by a contractor from a prime contractor is valid for a period of not more than one year and that a new certificate may be executed. (Sec. 3)

5. Defines alteration as an activity or action that causes a direct physical change to existing property and that does not increase the square footage of the existing property. (Sec. 3)

6. Defines modification as construction, grading and leveling ground, wreckage, demolition or other activities or actions that increase the square footage of the existing property.

7. States that these provisions apply to contracts entered into beginning January 1, 2021. (Sec. 4)

8. Contains a fiscal note.

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12. Initials VP              Ways & Means

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