Construction/Construction-Related Activity - modifying real property

Construction/Construction-Related Activity - modifying real property

Contractor's License

The Arizona Registrar of Contractors (ROC) licenses construction contractors in the state of Arizona. Generally, a contractor's license is required for any work totaling $1,000 or more for labor and material or if a building permit is required. 

Any business which contracts or offers to contract to build, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, development or improvement, or to do any part of the work must be a licensed contractor.

Also included in work requiring a license is the erection of scaffolding, connections to utility service lines, metering devices and sewer lines, mechanical or structural service to a structure or improvement and any other work in connection with the project.

"Contractor" includes subcontractors, floor covering contractors, landscape contractors and consultants representing themselves as having the ability to supervise or manage a construction project for the benefit of the property owner.

Supervision or management includes hiring and firing of specialty contractors, scheduling of work on the project, and selection and purchasing of construction material.

Apply online: Applying for a License? 

Webinar for application:

Contact: Arizona Registrar of Contractors - Licensing, 602.542.1525 or toll free within Arizona 877.692.9762


Transaction Privilege (Sales) Tax/Licensing

If you plan to operate a business that performs, coordinates, or supervises modification work, including contracting with any subcontractors, you may be subject to transaction privilege (sales) tax/licensing under the prime Contracting Activities classification. For more information, see "Engaging in activities subject to transaction privilege (sales)/use tax" below or click here.

During the 2013, 2014, and 2015 legislative sessions, the legislature made significant changes to how Arizona transaction privilege (sales) tax (“TPT”) applies to activities involving the modification or alteration of real property. 

Prior to January 1, 2015, Arizona Revised Statutes (A.R.S.) § 42-5075 Prime Contracting classification imposed TPT on the gross income derived from all modification activities and any other modifications to real property. However, effective January 1, 2015, the gross income derived from maintenance, repair, replacement or alteration (“MRRA”) activities affecting real property are not subject to transaction privilege (sales) tax under the Prime Contracting classification when the activities are performed directly for the property owner or authorized party. Activities that are deemed “modifications” of real property remain taxable under the Prime Contracting classification.

Additional Information:
Arizona Department of Revenue: Contracting Guidelines



As a contractor, you are responsible to file a Contractor's Bond in the amount required for your contractor's license classification, and anticipated annual gross volume. The bond may be in the form of a surety bond or a cash bond. (23)

Contact: Arizona Registrar of Contractors, Bond Information, 602.542.1525


If you are a new or out-of-state contractor, you may need to post a taxpayer bond (Publication 539) with the Arizona Department of Revenue to cover your future tax liabilities before a state Transaction Privilege Tax license will be issued.


The U.S. Small Business Administration’s (SBA) Surety Bond Guarantee (SBG) program can guarantee bid, performance and payment bonds for individual contracts of $2 million or less for small and emerging contractors who cannot obtain surety bonds through regular commercial channels.

Contact: U.S. Small Business Administration: Surety Bonds, SBA Arizona District Office: 602.745.7200 or SBA Seattle Bond Office: 206.553.2746 


Additional Information:
Arizona Department of Revenue, Publications: 603 Contracting Activities, 539 Taxpayer Bonds 

Alliance of Construction Trades (ACT) dba Arizona Construction Trades is a non-profit trade association founded in 1985.