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"It seems pretty goofy," says an artist who prefers not to be named out of fear of being audited. "If I understand this, someone can commission a work from me, and it's exempt from sales tax. But if I bolt it down, it's no longer a work of art. It becomes a piece of construction. And I turn from being an artist into a prime contractor."
Kros says that's exactly right. "People are kind of astounded that you can be a public artist and somehow be called a contractor. It's one of those things that happens when you have a broad statute."
He says that anybody who alters or improves real estate is a contractor.
The ruling was sparked by an inquiry from an artist who had been commissioned to produce a ramada and seating area at a fire station. The artist sought an exemption from having to get a tax license, claiming that the work was a custom-designed commission.
With the state scrambling for every loose tax dime, the Department of Revenue construed the commission, which was to be attached to real property, as a taxable work of prime contracting.
Esser attributes some of the confusion to the fact that the tax code is years behind the artistic times, especially in the realm of public art.
The tax provisions covering art and artists are based on the old identity of an artist who paints a picture and hangs it on a wall.
"We're not hanging it on the wall anymore," says Esser. "What we're doing now in Arizona as well as nationally . . . defies this traditional sense of the production of art."
Artists doing major public projects are often involved with engineers, architects and landscape architects in drawing up plans and shepherding them through the bidding and construction process. Since the birth of the Phoenix public art program in the late 1980s, just about every Valley city has developed public art programs and involved artists in the design of everything from public buildings, parks and streets to playgrounds, freeway sound walls and overpasses.
"Twenty years ago," says Esser, "state tax code authors just weren't thinking that those would be the tremendous range of activities that fall under the category of being an artist."
Lundquist points out that when she and her insurance agent recently assessed the range of her work, they realized that she fell closer to the category of landscaper than to that of an artist.
The bonding requirement would not affect much of the work she performs. That's because she is involved increasingly with other design professionals in teams whose plans are then built by bonded contractors.
"But the moment I want to insert something that really is from the artist's hand, that could become a problem. If I can't afford or get a bond, I might need to have a prime contractor install the work. If I'm imprinting designs into concrete, I would have to actually be there with my hands on my hips pointing and saying stamp it there and there and there."
That's hardly an ideal situation, especially when the quality of the work depends on the artist's touch.
Attorney Newmark says he is preparing a list of scenarios that the new ruling could affect. He plans to meet with the Department of Revenue in the coming months to clarify the meaning of the law.
"It's a delicate situation," says the department's Kros. "I don't think the Legislature would want to quell public art or anything like that. So something like this would have to be brought to their attention if they wanted to act appropriately to help these folks out."