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Taxing building permits

  • 1.  Taxing building permits

    Posted 05-06-2019 17:40
    As a general contractor, we have obtained building permits for the owner.  We are not charged tax when obtaining a building permit.  We have submitted a reimbursable invoice to the owner and have not charged tax on these reimbursable invoices.  The owner can also obtain the building permit directly and not pay taxes.
    Recently, we have received conflicting information regarding taxing building permits.  We are being told that we should be charging transaction privilege tax when submitting a reimbursable invoice to the owner.  I wanted to find out if any other local members have encountered this issue and how you are handling reimbursable invoices to the owner?
    Thank you.

    Lisa M. Autino, CCIFP, CPA
    Chief Financial Officer
    Caliente Construction, Inc.

  • 2.  RE: Taxing building permits

    Posted 05-07-2019 10:05
    Lisa, Michelle & I had an audit by AZDOR and we LOST that fight. We had to pay all the back taxes on those. We fought it big time to no avail - the State does not consider those a reimbursable - you will have to pay the back tax on all of those if they do an audit! Needless to say, we stopped doing that and they had to pull their own permit or we got it and charged TPT on it.

    Lynne Pace BS
    Chief Financial Officer
    Kinkaid Civil Construction
    Mesa AZ
    (480) 646-4438

  • 3.  RE: Taxing building permits

    Posted 05-08-2019 10:05
    We too lost this fight in audit many years ago.  Any costs that can be directly related to a construction contract must be treated in the same manner as the contract.  There are no "reimbursable" expenses on contracted work. ​

    Betsey Chavez CCIFP
    Rummel Construction, Inc.
    Scottsdale AZ
    (480) 222-9922

  • 4.  RE: Taxing building permits

    Posted 05-08-2019 14:07
    Agreed, Lynn! I spoke to Lisa yesterday and after she had conversations with several CFMA folks, the consensus was unanimous that DOR would consider these construction receipts and taxable. Your idea of having the owner pull permits and pay direct will save the taxes. One last comment is that this was a project taxed as prime contracting. If had been MRRA project, there would be no tax on the permits since they are not materials!

    Sent from my iPhone