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Legal Alert: Arizona Legislature and Governor Enact Legislation Exempting Certain Pre-Construction Services from State Prime Contracting Transaction Privilege (Sales) Tax

07/18/2008
Under new legislation enacted last month, and effective retroactive to tax years beginning after December 31, 2000, the gross income derived by a contractor from "design phase services" and "professional services" is not subject to the prime contracting classification of the Arizona transaction privilege (sales) tax if these services are included in a written contract that is separate from any construction contract and executed before any actual on-site work begins. This exemption applies regardless of whether the services are provided at the same time as taxable construction services under a separate construction contract. This exemption does not apply to any "construction phase services." Although the legislative change is retroactive, a taxpayer cannot claim a refund for past periods.

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