Arizona Transaction Privilege Tax Alert: Pipes & Valves Deduction Expanded to Include Wastewater, Effective October 1, 2025

Pipes and valves four inches in diameter or larger are nontaxable if they are used to transport oil, natural gas, artificial gas, water or coal slurry. The deduction also includes compressor units, regulators, machinery and equipment, fittings, seals and any parts used in operating the pipes or valves.

Senate Bill 1749 expands the existing TPT and use tax exemption for pipes and valves that are four inches in diameter or larger used to transport oil, natural gas, artificial gas, water or coal slurry to include pipes or valves used to transport wastewater effective to taxable periods beginning on the first day of the month following the general effective date, which is October 1, 2025. The Department’s longstanding position was that pipes and valves used to transport wastewater did not qualify. This Bill reverses that position.

NOTE: The Pipes and Valves deduction also applies to the prime contractor classification and the prime contractor can take a deduction for computing its prime contracting TPT liability for the cost of those pipes and valves.  

If you have any questions, please contact the author of this alert or the Womble Bond Dickinson Attorney with whom you normally work.