Stay up to date with sales tax: Join our mailing list!

Arkansas has amended its sales and use tax exemption to clarify that a partial replacement of manufacturing machinery and equipment which improves manufacturing efficiency is exempt. Machinery and equipment used directly in the manufacturing process include: molds, frames, cavities, and forms that determine the physical characteristic of a product or its packaging material at any stage in the manufacturing process. Dies, tools, and devices attached to or part of a unit of machinery that determine the physical characteristics of the product or its packaging material at any stage of the manufacturing process also qualify for the exemption. In addition, the exemption covers any testing equipment used to measure the quality of the product at any stage of the manufacturing process (Act. 1208 {S.B. 770}, Laws 2009, effective April 7, 2009).


Effective January 1, 2008, single purchase transactions over $2,500 are no longer subject to a cap on county sales or use taxes. Since the Arkansas General Assembly decided to lift this cap, it will be difficult to get the cap reinstated. The General Assembly does give counties the power to charge sales and use taxes at their discretion; however, they do not give them the power to determine which transactions are accountable to the tax. (Opinion No. 2008-030, Arkansas Attorney General, April 15, 2008)


In a recent law change, Arkansas has altered their definition of computer software to explicitly exclude “load and leave” software delivery. The new definition of “computer software” now states that “computer software does not include software delivered electronically or by load and leave.” Load and leave is defined as delivery “by use of a tangible storage media in which the tangible storage media is not physically transferred to the purchaser.” (Arkansas Sec. 24-52-304, Effective January 1, 2008)


Arkansas has filed a petition to become a full member state on the Streamlined Sales Tax (SST) Governing Board effective January 1, 2008. Current an associate member state, Arkansas has amended certain definitions, including “telecommunication services,” “food sales by nonprofit schools,” “timber harvesting equipment,” “disposable medical supplies and durable medical equipment,” and “sourcing rule for florists,” to conform with the SST Agreement – a requirement before becoming a full member state. (Petition for Membership and Certificate of Compliance, Arkansas Department of Revenue, file July 2, 2007)


Arkansas has implemented an emergency rule which reduces the sales and use tax rate on natural gas and electricity. Effective July 1, 2007, the tax rate for utilities used directly in the actual manufacturing process is reduced from 6% to 4.5%. Furthermore, the rate will drop to 4.0%, effective July 1, 2008. Manufacturing is generally defined as the physical or chemical transformation of materials or substances into new products. Natural gas and electricity used for any other purpose will be taxed at 6%. (Emergency Rule 2007-5, Arkansas Department of Finance and Administration, Effective June 8, 2007)



Scroll to Top