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   RE: Original Material Cost Reporting to GC for AZ5005 when MRRA
 From: David Miller
 To: Valley of the Sun, Phoenix, AZ
 Posted: 04-14-2016 12:14


Attached is a copy of TPN - 15 Revised June 2015, issued by Arizona Department of Revenue to "help" explain the quagmire that is Arizona transaction privilege tax for contractors. Q & A 20 addresses your question. Contractors performing either work classified as prime contracting or work classified as MRRA can issue a form 5005. By issuing the form 5005, that contractor (General Contractor) is assuming responsibility of remitting the tax due on the project, for prime contracts at the prime contracting tax rate, and for MRRA contracts at the retail tax rate on the materials incorporated into the project. If a general contractor issues a form 5005 on an MRRA project, they would need to collect the cost of materials on the projects from the subcontractors billings by having the subcontractor break out the material costs vs labor and other.

The reason that a general contractor would want to issue a form 5005 on a MRRA project would be that in the event it is determined that the project did not meet the definition of an MRRA project, then the general contractor does not get credit for the tax paid previously paid by the subcontractors even though the subcontractors are passing it through to the general contractor. In the event of an audit, and ADOR determines a project does not meet the definition of an MRRA project, the general contractor would be responsible for the tax. The definition of MRRA is subjective and can be quite confusing to say the least.

David Miller CCIFP, CTP
Cfo / Treasurer
Jokake Construction Services, Inc.
Phoenix AZ
(602) 224-4573
Original Message:
Sent: 04-13-2016 14:15
From: Aaron Tingwald
Subject: Original Material Cost Reporting to GC for AZ5005 when MRRA

Could someone help me to better understand how GC’s are handling reporting actual costs for sales tax purposes on a monthly basis on MRRA projects where the GC has provided an AZ5005 from to their subs?

Do GC’s providing an AZ5005 on MRRA projects have a way of accurately reporting/remitting sales tax on the sub's materials without needing to request actual costs from their subs?

Aaron Tingwald CCIFP
Assistant Controller
Wilson Electric Services Corp.
Tempe AZ
(480) 505-6657

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