HB 2521 Summary: TPT Reform; Contractors

• Replaces the "prime contracting" classification with two new classifications: "highway, street and bridge construction" (taxed at 5% of 65% of gross proceeds) and "manufactured building dealer" (taxed at 5% of 65% of gross proceeds), effective January 1, 2018.

• Removes the broad tax exemption for contractors and materials incorporated into projects; instead limits exemptions to specific highway/street/bridge construction and manufactured building activities, requiring contractors to obtain certificates for tangible personal property purchases.

• Creates a municipal revenue sharing pool funded by 4% of monthly retail transaction privilege tax revenues from cities and towns (adjusted annually based on construction as percentage of gross domestic product), distributed proportionally based on each city/town's 36-month average net building permit value.

• Repeals sections 42-5007 and 42-5008.01 and makes conforming changes to transaction privilege tax definitions and administration throughout the Arizona Revised Statutes.

• Includes transition provisions protecting contracts entered into before January 1, 2018 under the prior "prime contracting" classification, with pre-existing contracts remaining subject to the old tax rate and distribution formulas.