Contractors in Arizona, the New Sales Tax and Your Bottom Line

Arizona Contractors In a Pickle?

Arizona’s economic recover has probably been deferred 6-8 months with the sales tax increase passed earlier this week by voters and sadly will put more strain on the construction industry. Mark Minter of the Arizona Builders Alliance (ABA) shared this with me to clarify when and how the tax will impact existing and future construction contracts, so I’m passing it onto my readers verbatim:

In yesterday’s election the voters of the State of Arizona overwhelmingly approved a temporary 1% increase in the sales tax rate. The higher rate goes into effect June 1st, 2010.

The ABA successfully lobbied a protection from increases such as this into state law several years ago. That statute reads:

ARS 42-5010 H. Any increase in the rate of tax that is imposed by this chapter and that is enacted by the legislature or by a vote of the people does not apply with respect to contracts entered into by prime contractors or pursuant to written bids made by prime contractors on or before the effective date of the legislation or the date of the election enacting the increase. To qualify for the exemption under this subsection, the prime contractor must maintain sufficient documentation, in a manner and form prescribed by the department, to verify the date of the contract or written bid.

Projects that are bid or contracted to prior May 18th are exempt from the sales tax increase.

What Impacts Your Bottom Line?
The sales tax increase ups the owner’s cost of building at a time where many contractors are still struggling to survive. As a construction company you will continue to keep your construction office overhead low. Recently I shared some ideas with ConstrucTech Magazine’s readers on what I’ve seen contractors do…some good ideas and a few things to avoid as it relates to computer systems and technology spending. Here’s a link to the May 2010 article “Technology Budgets in a Pickle”.

I’d love to hear what you’ve successfully implemented (click the comment option at the top of the blog) and feel free to share this with the construction industry as we all can use a little help.