Let's talk about transaction privilege tax when building a home in arizona.

[78Southwind]

The best I can tell is the transaction privilege tax is a tax assessed when builders are building speculative homes. Is this correct? How would it affect if at all an individual that wants to use a homebuilder to build a primary or vacation home?

 

[Flatsix66]

subscribed

 

[ChumpChange]

The best I can tell is the transaction privilege tax is a tax assessed when builders are building speculative homes. Is this correct? How would it affect if at all an individual that wants to use a homebuilder to build a primary or vacation home?

Don't know anything about it. But the difference between your two scenarios is who owns the property/land at the time of construction. A spec home is owned by the builder and sold once completed. They get the equity on sale. Using a homebuilder to build you a house on your land is like hiring a contractor for anything.

 

[78Southwind]

I am trying to find specific information on how this tax affects and when it comes into play for homebuilders. The basic information I can find is that it is similar to a sales tax. So I am curious if this tax is passed on to the homeowner or is it only charged when a builder is building/selling a spec home.

Although commonly referred to as a sales tax, the Arizona transaction privilege tax (TPT) is actually a tax on a vendor for the privilege of doing business in the state. Various business activities are subject to transaction privilege tax and must be licensed.
https://azdor.gov/transaction-privilege-tax-tpt

 

[franky]

PLEASE do not open this pandora's box, at least not in Havasu....

 

[78Southwind]

This is straight up bullhead so you guys in Havasu can relax...for now

To shed a little light on why I am asking this question, my parents have been sitting on a lot (the holy grail of lots) for about 15 years now and every time they want to build on the lot some sort of shit storm happens. 2008 Real Estate Crash, 2019 Health Problems, 2020 Pandemic... So they are finally getting some quotes and they notice one builder has a line item for Transaction Privilege Tax. It's just a little less than 5% of the total build cost.

 

[Happy Smitty]

The sales tax has to be paid either at the subcontractor level or general contractor level. Either way the tax has to be paid. AZ considers the GC responsible to collect tax if a certain budget and structure modification threshold is met otherwise the subs collect the tax. I'm not Familiar with owner builder but if I had to guess just make sure the subs include tax on thier proposals.

 

[78Southwind]

The sales tax has to be paid either at the subcontractor level or general contractor level. Either way the tax has to be paid. AZ considers the GC responsible to collect tax if a certain budget and structure modification threshold is met otherwise the subs collect the tax. I'm not Familiar with owner builder but if I had to guess just make sure the subs include tax on thier proposals.

It's pretty bizarre when you read about it online. They make it sound like it's similar to a retail sales tax. I don't get it. What are you paying taxes on, each individual subcontractors and the general contractors labor?

 

[Happy Smitty]

Yeah it's very confusing. Basically if a GC builds a new spec home, the GC is considered a reseller and collects/pays the tax. Based on 65% of revenue and the tax rate of the build location. There is a tax table online for each county and city.

Construction under, I think $750,000 on an existing structure can be considered maintenance and not subject to tax.

I think Owner builder may be different but not sure.

 

[78Southwind]

Yeah it's very confusing. Basically if a GC builds a new spec home, the GC is considered a reseller and collects/pays the tax. Based on 65% of revenue and the tax rate of the build location. There is a tax table online for each county and city.

Construction under, I think $750,000 on an existing structure can be considered maintenance and not subject to tax.

I think Owner builder may be different but not sure.

Just so we understand each other this is not a spec home. My parents are getting quotes on building their vacation home. They will be selling their current vacation home and this new home once built will be their vacation home. I appreciate the insight but can you confirm if the tax is charged on a vacation home as well?

 

[Happy Smitty]

Yes the GC has to collect and pay tax on the sale of any new home build.

 

[OC Mike]

Unless the subs have a resale license, they are probably paying tax on their products. So now the GC has to collect tax on the entire value of the project?

 

[Bentonstarr]

Yes the GC has to collect and pay tax on the sale of any new home build.

I know this is a old post but I also am confused about this tax.

We just built a house. On land we own with a general contractor.

Do you know if this tax is tax deductible for the homeowner?

It’s seems like we are getting taxed and top of taxes.

 

[Xtrmwakeboarder]

I know this is a old post but I also am confused about this tax.

We just built a house. On land we own with a general contractor.

Do you know if this tax is tax deductible for the homeowner?

It’s seems like we are getting taxed and top of taxes.

You’re always getting taxed on top of taxes.

 

[bilz]

Sounds like CA has crossed the border. But the weather stayed.

 

[rivermobster]

Just so we understand each other this is not a spec home. My parents are getting quotes on building their vacation home. They will be selling their current vacation home and this new home once built will be their vacation home. I appreciate the insight but can you confirm if the tax is charged on a vacation home as well?

So what did they end up doing?

 

[DC-88]

Sounds like CA has crossed the border. But the weather stayed.

More like King George III . Every 30 days we pay that stupid tpt for our Az const. co and the DOR is on you like white on rice with penalties if a single dollar is missing or a day late. Our Ca const co obviously pays higher state income tax but the process is way simpler . I've heard stories of flaky contractors not paying it on custom builds, and the homeowner getting stuck with the tpt from their home build which should have been included in their bid. Getting GC's to save the tax money and then pay it monthly rather than just having the stuff taxed at the point of sale sure seems to be a lot more work, and we pay our book keeper each month to deal with it.

 

[78Southwind]

So what did they end up doing?

They never built.