AZ SB1409

Amends Arizona transaction privilege tax classifications for prime contracting to clarify that work not required to be licensed by the registrar of contractors is excluded from the prime contracting classification.

Modifies the definition of "alteration" to exclude maintenance, repair, or replacement activities and establishes thresholds based on contract amount, square footage percentage, or expansion percentage to determine when a contract constitutes taxable alteration.

Adds a provision allowing contracts that slightly exceed alteration thresholds (up to 25 percent over) to still qualify as non-taxable alterations if parties reasonably believed at contract inception they would be treated as alterations.

Amends section 42-6004 to exempt municipal taxes on gross proceeds from maintenance, repair, replacement, or alteration of existing property unless the contract qualifies as a taxable modification under specified criteria.

Effective December 31, 2018, with contracts entered into before that date treated under prior tax requirements.