Valley of the Sun, Phoenix, AZ

As a general contractor, we have obtained building permits for the owner.  We are not charged tax when obtaining a building permit.  We have submitted a reimbursable invoice to the owner and have not charged tax on these reimbursable invoices.  The owner can also obtain the building permit directly and not pay taxes.
Recently, we have received conflicting information regarding taxing building permits.  We are being told that we should be charging transaction privilege tax when submitting a reimbursable invoice to the owner.  I wanted to find out if any other local members have encountered this issue and how you are handling reimbursable invoices to the owner?
Thank you.

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Lisa M. Autino, CCIFP, CPA
Chief Financial Officer
Caliente Construction, Inc.
lautino@calienteconstruction.com
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Lisa, Michelle & I had an audit by AZDOR and we LOST that fight. We had to pay all the back taxes on those. We fought it big time to no avail - the State does not consider those a reimbursable - you will have to pay the back tax on all of those if they do an audit! Needless to say, we stopped doing that and they had to pull their own permit or we got it and charged TPT on it.

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Lynne Pace BS
Chief Financial Officer
Kinkaid Civil Construction
Mesa AZ
(480) 646-4438
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Original Message:
Sent: 05-06-2019 17:39
From: Lisa Autino
Subject: Taxing building permits

As a general contractor, we have obtained building permits for the owner.  We are not charged tax when obtaining a building permit.  We have submitted a reimbursable invoice to the owner and have not charged tax on these reimbursable invoices.  The owner can also obtain the building permit directly and not pay taxes.
Recently, we have received conflicting information regarding taxing building permits.  We are being told that we should be charging transaction privilege tax when submitting a reimbursable invoice to the owner.  I wanted to find out if any other local members have encountered this issue and how you are handling reimbursable invoices to the owner?
Thank you.

------------------------------
Lisa M. Autino, CCIFP, CPA
Chief Financial Officer
Caliente Construction, Inc.
lautino@calienteconstruction.com
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We too lost this fight in audit many years ago.  Any costs that can be directly related to a construction contract must be treated in the same manner as the contract.  There are no "reimbursable" expenses on contracted work. ​

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Betsey Chavez CCIFP
C.F.O.
Rummel Construction, Inc.
Scottsdale AZ
(480) 222-9922
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Original Message:
Sent: 05-07-2019 10:04
From: Lynne Pace
Subject: Taxing building permits

Lisa, Michelle & I had an audit by AZDOR and we LOST that fight. We had to pay all the back taxes on those. We fought it big time to no avail - the State does not consider those a reimbursable - you will have to pay the back tax on all of those if they do an audit! Needless to say, we stopped doing that and they had to pull their own permit or we got it and charged TPT on it.

------------------------------
Lynne Pace BS
Chief Financial Officer
Kinkaid Civil Construction
Mesa AZ
(480) 646-4438

Original Message:
Sent: 05-06-2019 17:39
From: Lisa Autino
Subject: Taxing building permits

As a general contractor, we have obtained building permits for the owner.  We are not charged tax when obtaining a building permit.  We have submitted a reimbursable invoice to the owner and have not charged tax on these reimbursable invoices.  The owner can also obtain the building permit directly and not pay taxes.
Recently, we have received conflicting information regarding taxing building permits.  We are being told that we should be charging transaction privilege tax when submitting a reimbursable invoice to the owner.  I wanted to find out if any other local members have encountered this issue and how you are handling reimbursable invoices to the owner?
Thank you.

------------------------------
Lisa M. Autino, CCIFP, CPA
Chief Financial Officer
Caliente Construction, Inc.
lautino@calienteconstruction.com
------------------------------

Agreed, Lynn! I spoke to Lisa yesterday and after she had conversations with several CFMA folks, the consensus was unanimous that DOR would consider these construction receipts and taxable. Your idea of having the owner pull permits and pay direct will save the taxes. One last comment is that this was a project taxed as prime contracting. If had been MRRA project, there would be no tax on the permits since they are not materials!

Sent from my iPhone


Original Message------

Lisa, Michelle & I had an audit by AZDOR and we LOST that fight. We had to pay all the back taxes on those. We fought it big time to no avail - the State does not consider those a reimbursable - you will have to pay the back tax on all of those if they do an audit! Needless to say, we stopped doing that and they had to pull their own permit or we got it and charged TPT on it.

------------------------------
Lynne Pace BS
Chief Financial Officer
Kinkaid Civil Construction
Mesa AZ
(480) 646-4438
------------------------------