Getting an Arizona contractor license can be a complex process. There is a lot to understand when it comes to license classifications and the costs associated with getting a license.
This article will outline:
- The education and testing fees
- The required bonding fees
- The application fees
- Plus the renewal and fees for maintaining a license
Education And Testing Fees
There are numerous testing requirements depending on the license being obtained.
- The AZ Statutes and Rules course and exam
- Specific trade examinations
- Separate solar specialization exam
Arizona Statutes and Rules Training Course and Exam
This is a computer based training to teach applicants the Arizona statutes and rules for contractors. The exam consists of 80 questions with a 180 minute completion time and requires a 70% passing score.
Topics covered in this exam are:
- Contractor statutes
- Contractor rules
- Workmanship standards
- Business management
- Business mathematics
- Contracts and agreements
- Insurance and bonding
- Safety, record keeping, and reporting
- Labor laws and employee regulations
- Financial management
- Tax laws
- Liens
- Environmental laws and regulations
In Arizona, the course and test are taken through Gmetrix and have a $54 exam fee.
Third party exam prep courses exist for this test. The costs seem to range from $120 to $149. These costs are not required, but a good idea to ensure the best opportunity to pass the exam on the first try.
Every license classification is required to take the Statutes and Rules course and exam.
Trade Exams
There are about 88 different AZ ROC specialty license classifications. Most trade classifications require a trade exam. Some have an optional trade exam which can be taken and satisfy a portion or all of that trade experience requirement.
Trade specific examinations are have a $66 exam fee paid to PSI, the company in charge of administering the exams.
There are many third party companies to help with exam prep and practice. Exam prep books can be purchased on Amazon for as little as $49.95 to more complete exam prep courses upward of $500.
NASCLA Accredited Examination Program
Contractors getting:
- B-1 General Commercial Contractor license
- B-2 General Small Commercial Contractor license
- CR-11 Electrical license
- C-11 Electrical license
- R-11 Electrical license
...can take the appropriate National Association of State Contractors Licensing Agencies examination. This is an organization that standardizes the exam procedures for participating states and jurisdictions.
Contractors who take their exam through the NASCLA are able to obtain licenses in other states and jurisdictions without having to retake redundant exams. This opens up a contractors business to multiple states and helps in natural disaster relief situations.
The examination cost for the General Commercial and General Small Commercial contractor is $106 with a $25 application fee.
The examination cost for the electrical trade licenses is $116.
Arizona Contractor Bonding Requirements
Contractor Surety Bonds
Arizona requires all licensees to purchase a surety bond. The amount of the required bond is based on the license and the amount of expected gross revenue.
What is a surety bond? In short a surety bond is financial backing that a contractor will fulfill the promises made to clients and customers while following Arizona contractor license requirements.
These promises include:
- Fulfilling on contracted promises
- Ensuring good workmanship
- Following building and specialty codes
- Paying subcontractors
Here's a table outlining the required bonding amounts required by AZ ROC.
| License Type | Contemplated Gross Volume (Per License) | Bond Amount |
|---|---|---|
| Residential General Contractors | Less than $750,000 | $9,000 |
| $750,000 or more | $15,000 | |
| Residential Specialty Contractors | Less than $375,000 | $4,250 |
| $375,000 or more | $7,500 | |
| Commercial General Contractors (Includes General Engineering Contractors) | $150,000 or less | $5,000 |
| In excess of $150,000 but not more than $500,000 | $15,000 | |
| In excess of $500,000 but not more than one million | $25,000 | |
| In excess of one million but not more than five million | $50,000 | |
| In excess of five million but not more than ten million | $75,000 | |
| In excess of ten million | $100,000 | |
| Commercial Specialty Contractors | $150,000 or less | $2,500 |
| In excess of $150,000 but not more than $500,000 | $7,000 | |
| In excess of $500,000 but not more than one million | $17,500 | |
| In excess of one million but not more than five million | $25,000 | |
| In excess of five million but not more than ten million | $37,500 | |
| In excess of ten million | $50,000 |
Dual license bond amounts are the sum of the residential bond amount and the commercial bond amount.
For example, a Dual General Contractor will require a bond amount of:
| License | Contemplated Gross Volume (Per License) | Bond Amount |
|---|---|---|
| Residential General Contractor | Less than $750,000 | $9,000 |
| Commercial General Contractor | Less than $500,000 but not more than one million | $15,000 |
| Bond Total: | $24,000 |
The cost of an Arizona contractor bond depends on the amount required.
For example, a residential general contractor with expected gross revenue (per license) of:
- Less than $750,000 requires a bond amount of $9,000
- Greater than $750,000 requires a bond amount of $15,000
Both of these bond amounts require a custom quote, explained in a minute.
A residential specialty contractor with expected gross revenue (per license) of:
- Less than $375,000 requires a bond amount of $4,250
- Greater than $375,000 requires a bond amount of $7,500
Surety Bonds Direct currently offers a $4,250 speciality contractor bond for a fixed price with no credit check.
Bonds over the $4,250 amount require a quote. This quote will determine a rate based on:
- The contractor’s personal credit
- Business and industry experience
- Any prior claims on past bonds
Surety Bond Direct is a specialized surety agency and works with multiple sureties. This allows Surety Bonds Direct to obtain multiple rates from different companies and **deliver the lowest rate.
Rates for contractor bonds vary depending on the contractor, but rates as low as 1% to 3% are common. Here are some example costs based on a $9,000 Residential General Contractor bond.
| Bond Amount | Premium Rate | Total Cost |
|---|---|---|
| $9,000 | 1% | $90 |
| $9,000 | 2% | $180 |
| $9,000 | 3% | $270 |
| $9,000 | 4% | $360 |
| $9,000 | 5% | $450 |
If you want to learn more details about the bonding process, read our post about how to get a surety bond in 3 steps.
Don't Put Off Purchasing Your Bond
A contractor bond is required to obtain an Arizona contractor license. How long it takes to get a surety bond can vary, but is usually a matter of 1-2 business days.
Do not wait or put off starting the bond process. Surety Bonds Direct can future date the effective date of the bond to coincide with the date the application will be submitted. This makes it easy to start the bonding process now.
Taxpayer Contractor Bonds
The Arizona Department of Revenue requires contractors engaging in taxable construction projects to obtain a Transaction Privilege Tax license. This is issued with the completed contractors license and ensures the contractor will pay the required 5.6 percent sales tax.
New contractors, out-of-state contractors without a principal business location in Arizona, and contractors who have failed to pay the appropriate sales tax in the past must purchase a Taxpayer Contractor bond.
The Taxpayer bond amount is determined by first calculating the average monthly liability, which is equal to the average monthly tax due from the licensee for the preceding six consecutive months.
If the the licensee does not have a six month payment history, the bond amount is a minimum of $5,000.
If the licensee can calculate the average monthly liability, the Taxpayer bond amount is based on:
- Licensees reporting monthly - Four times the average monthly liability
- Licensees reporting quarterly - Six times the average monthly liability
- Licensees reporting annually - Fourteen times the average monthly liability
All Arizona Taxpayer bonds require a quote to determine the rate.
All Arizona contractor bonds are continuous, meaning the bonds will remain in force as long as the renewal premium is paid on time.
Application Fees
Here's a table of the application fees according to the type of license classification.
| New License Application | ||||
|---|---|---|---|---|
| Classification | Application Fee | License Fee | Recovery Fund Assessment | Total |
| General Commercial (A, B-1, B-2) | $200 | $580 | $0 | $780 |
| Specialty Commercial (C) | $100 | $480 | $0 | $580 |
| General Residential (B, B-3, B-4, B-5, B-6, B-10) | $180 | $320 | $370 | $870 |
| Specialty Residential (R) | $80 | $270 | $370 | $720 |
| General Dual (KA, KB-1, KB-2) | $200 | $480 | $370 | $1050 |
| Specialty Dual (CR) | $100 | $380 | $370 | $850 |
| Renewal License Application | ||||
|---|---|---|---|---|
| Classification | License Fee | Recovery Fund Assessment | Total | |
| General Commercial (A, B-1, B-2) | $580 | $0 | $580 | |
| Specialty Commercial (C) | $480 | $0 | $480 | |
| General Residential (B, B-3, B-4, B-5, B-6, B-10) | $320 | $270 | $590 | |
| Specialty Residential (R) | $270 | $270 | $540 | |
| General Dual (KA, KB-1, KB-2) | $480 | $270 | $750 | |
| Specialty Dual (CR) | $380 | $270 | $650 | |
Recovery Fund Assessment
The Arizona Registrar of Contractors' Recovery Fund is designed to provide financial assistance to consumers who have been harmed by licensed contractors. If a situation arises where a contractor is not able or unwilling to pay for a valid claim, the customer can apply to the Recovery Fund for reimbursement of up to $30,000 in damages.
If a contractor opts out of contributing to the Recovery Fund, an additional surety bond with a $200,000 amount must be purchased.
The Final Required Arizona Contractor License Costs
The application and examination fees are the fixed costs. In most cases the largest cost of obtaining a contractor license will be the bonding costs.
This is why it's so important to work with a specialized surety agent like Surety Bonds Direct to obtain the lowest possible cost (premium) on the required contractor and possible taxpayer bond.
If you need to obtain your specialty contractor bond in Arizona with expected gross revenue (per license) less than $375,000, Surety Bonds Direct offers fixed prices for one, two, and three year periods.
If you require a bond more than $4,250, a quote is required. You can obtain a free no obligation quote by filling out our quote request form online. If you're unsure which bond amount you need, call a bond specialist today at 1-800-608-9950.
