Sales tax on labor in Arizona: taxed on new construction, not on building repairs; repairs to things and installation depend on the job

Repairing a thing in Arizona

It depends. Repairing a thing: the parts are taxed, the labor is not — if the labor is shown separately on the invoice and in your books. What it turns on: labor separately stated on invoice and in records.

• “The sale of the repair parts is subject to tax but the labor involved in making the repair is not taxable if it is separately stated on the invoice and in the company's books and records.” — Arizona Transaction Privilege Tax Ruling TPR 93-31, page date: Signed May 10, 1993

Repairing a home or building in Arizona

Not taxed. Maintenance, repair, replacement and small alterations to existing buildings (MRRA) are not taxed: no tax line on the invoice. You pay tax on your materials when you buy them.

• “No, labor is not taxable and a contractor's invoice for MRRA projects should not include a line item for tax as neither the labor or the materials are taxable (although a contractor will pay tax on the materials when they are purchased).” — Contracting FAQs (Arizona Department of Revenue), no date on the page
• “Repair: Returning existing property to a usable state ... For example, fixing a leaky bathtub or shower ... Replacement: ... For example, removal and replacement of a roof, flooring, a sprinkler system or HVAC unit.” — MRRA Contracting (Arizona Department of Revenue), no date on the page
• “MRRA is not taxable for prime contracting TPT purposes. However, unless otherwise exempt or deductible, the materials utilized in an MRRA project remain subject to "retail TPT" or equivalent of retail TPT.” — MRRA Contracting (Arizona Department of Revenue), no date on the page

Installation work in Arizona

It depends. Installing onto a thing (a car, an RV): labor is not taxed if shown separately. Installing into a building: replacing an existing component or system (HVAC unit) counts as MRRA and is not taxed; new installation that is part of a new build is taxed as prime contracting. What it turns on: installed on a thing vs. in a building; replacement (MRRA) vs. new construction; separate statement for retail installs.

• “No, labor is not taxable and a contractor's invoice for MRRA projects should not include a line item for tax as neither the labor or the materials are taxable (although a contractor will pay tax on the materials when they are purchased).” — Contracting FAQs (Arizona Department of Revenue), no date on the page
• “Repair: Returning existing property to a usable state ... For example, fixing a leaky bathtub or shower ... Replacement: ... For example, removal and replacement of a roof, flooring, a sprinkler system or HVAC unit.” — MRRA Contracting (Arizona Department of Revenue), no date on the page
• “The installation if kept separate from the retail sale on the invoice through the books and records would be considered a service rendered in addition to the retail sale ... Please note if you were installing on real property, (e.g. land and/or building), the installation may be subject to TPT under the prime contracting classification.” — Contracting FAQs (Arizona Department of Revenue), no date on the page

New construction in Arizona

Taxed.

• “Modification activities encompass "ground up" construction ... for example, building a new home.” — Modification Contracting (Arizona Department of Revenue), no date on the page
• “If installed on a taxable modification project, the gross income from the contract will be included in the tax base subject to tax under the prime contracting classification.” — Modification Contracting (Arizona Department of Revenue), no date on the page

Listing labor separately on the bill in Arizona

Changes the answer. For retail repair and installation on things, labor must be shown separately on the invoice and in your books to stay untaxed. For MRRA building work, labor and the job are untaxed regardless.

• “The sale of the repair parts is subject to tax but the labor involved in making the repair is not taxable if it is separately stated on the invoice and in the company's books and records.” — Arizona Transaction Privilege Tax Ruling TPR 93-31, page date: Signed May 10, 1993
• “The installation if kept separate from the retail sale on the invoice through the books and records would be considered a service rendered in addition to the retail sale ... Please note if you were installing on real property, (e.g. land and/or building), the installation may be subject to TPT under the prime contracting classification.” — Contracting FAQs (Arizona Department of Revenue), no date on the page
• “the person's books shall be kept so as to show separately the gross proceeds of sales of tangible personal property and the gross income from sales of services, and if not so kept the tax shall be imposed on the total” — A.R.S. § 42-5061 Retail classification, no date on the page

Materials on jobs in Arizona

What Arizona's own pages say about the materials:

• “No, labor is not taxable and a contractor's invoice for MRRA projects should not include a line item for tax as neither the labor or the materials are taxable (although a contractor will pay tax on the materials when they are purchased).” — Contracting FAQs (Arizona Department of Revenue), no date on the page
• “MRRA is not taxable for prime contracting TPT purposes. However, unless otherwise exempt or deductible, the materials utilized in an MRRA project remain subject to "retail TPT" or equivalent of retail TPT.” — MRRA Contracting (Arizona Department of Revenue), no date on the page

Trade services Arizona taxes

Not checked here. Whether Arizona taxes landscaping, cleaning or pest control was not confirmed from an official page.

Where Arizona's own guidance gives two answers

Arizona's own pages say both of these:

• “Repair or installation of tangible personal property which is permanently attached to real property is taxable under the contracting classification.” — Arizona Transaction Privilege Tax Ruling TPR 93-31, page date: Signed May 10, 1993
• “No, labor is not taxable and a contractor's invoice for MRRA projects should not include a line item for tax” — Contracting FAQs (Arizona Department of Revenue), no date on the page

Check with the Arizona Department of Revenue

Before you bill: check with the Arizona Department of Revenue. As of November 6, 2026.

Worth knowing: City taxes in Arizona were not checked here.

This is a plain-words summary of each state's own revenue guidance as of November 6, 2026, not tax advice. Rules have exceptions, and cities and counties can add taxes of their own. Check with the state's tax department, linked on every state's page, before you bill.

Compare Arizona with every state's answer, or with its neighbours just below.

Next door to Arizona

• California: home repair not taxed, installation depends
• Nevada: home repair not taxed, installation depends
• New Mexico: gross receipts tax; home repair taxed, installation taxed
• Utah: home repair not taxed, installation depends

Official sources for Arizona

• Contracting FAQs (Arizona Department of Revenue) — no date shown
• MRRA Contracting (Arizona Department of Revenue) — no date shown
• Modification Contracting (Arizona Department of Revenue) — no date shown
• Arizona Transaction Privilege Tax Ruling TPR 93-31 — Signed May 10, 1993
• A.R.S. § 42-5061 Retail classification — no date shown

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