Understanding the New Arizona Sales Tax Increase

Effective date(s) of the sale tax rate increase that was approved by voters on May 18 relating to prime contractors and other businesses that comes from the Arizona Dept of Revenue website.

For Prime Contractors: Any increase in the rate of tax does not apply to contracts entered into or pursuant to written bids made by Prime Contractors on or before May 18, 2010. The prime contractor must maintain documentation to verify the date of the contract or written bid. Gross income received from Pre-existing Prime Contracts will be reported under Class 215.

For other businesses: Any increase in the rate of tax does not apply for 120 days from the date of the tax rate increase to the gross proceeds of sales or gross income from the business of a taxpayer with respect to written contracts entered into before June 1, 2010 unless the taxpayer has entered into a contract that contains a provision that entitles the taxpayer to recover from the purchaser the amount of the additional tax levied. The business must maintain documentation to verify the date of the written contract. This availability of the reduced rate will expire 9/30/2010. When reporting gross income received from a written contract entered into before June 1, 2010 if the contract does not contain a provision that entitles the taxpayer to recover from the purchaser the amount of the additional tax levied, use the following codes.

•    204: Pre-6/2010 Utilities Contracts
•    205: Pre-6/2010 Communications Contracts
•    206: Pre-6/2010 Transporting Contracts
•    207: Pre-6/2010 Private (rail)Car Contracts
•    208: Pre-6/2010 Pipeline Contracts
•    209: Pre-6/2010 Publication Contracts
•    210: Pre-6/2010 Job Printing Contracts
•    211: Pre-6/2010 Restaurant & Bar Contracts
•    212: Pre-6/2010 Amusement Contracts
•    214: Pre-6/2010 Rental of Personal Property Contracts
•    217: Pre-6/2010 Retail Contracts
•    225: Pre-6/2010 Transient Lodging Contracts
•    237: Pre-6/2010 Contracting Owner/Builder Contracts

Related: New Mandatory Changes to Arizona Withholding

G. Ross Dietrich, CPA, CIT
Senior Audit Manager
(602) 776-6344 Direct
rdietrich@pkcpa.com