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On February 15, 2007, Arkansas Governor Mike Beebe signed into law Senate Bill 185 which reduces the state sales and use tax rate on food and food ingredients from 6% to 3%, effective July 1, 2007. The 3% state rate includes a new 2-7/8% statutory rate plus the 1/8% constitutional rate. The term “food and food ingredients” includes any substances, whether in liquid, concentrate, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. The definition does not include alcoholic beverages, tobacco, dietary supplements, or prepared foods. Food and food ingredients continue to be subject to any applicable local sales and use tax. Further rules and regulations apply. (Act 110, S.B. 185, Laws 2007)

(02/20/2007)

The State of Arkansas has added a new regulation that clarifies the treatment of labor charges that stem from equipment used in manufacturing. According to the new regulation, the service of installing, altering, adding to or replacing machinery is exempt if the machinery being worked on qualifies for as exempt machinery used in manufacturing. The services are exempt regardless of who is performing them. The service of repairing (not adding to or altering) is still considered to be a taxable service. (Arkansas Department of Finance and Administration, Revenue Rule 9.18, Added December 2006)

(02/12/2007)

After six years of negotiations, the Streamlined Sales Tax (SST) Governing Board has adopted a compromise rule despite concerns regarding the complexity of the definition and interpretation. Several states had originally objected to the inclusion of rules that allowed a price of any de minimis taxable products (representing 10% or less of the otherwise considered bundled transaction) to be tax exempt, but eventually withdrew their request of suggesting a dollar cap on the de minimis test. This request was eventually dropped. Instead, once a transaction has been determined not to be a bundled transaction, states are prohibited from (1) using thresholds to tax a portion of the sales price, (2) taxing the total sales or purchase price, or (3) requiring sellers to separately-state (or itemize) taxable products on the invoice.

(12/28/2006)

During the SST Governing Board meeting, both sourcing amendments proposed by Texas and Ohio were defeated. The proposals aimed to give states the option of local sourcing in contrast to the current destination sourcing of SSTP states. The Ohio amendment would have allowed states to source most intrastate sales on an origin basis, while either a state-wide rate or destination-based rules would apply to out-of-state sellers making sales into the state. The Texas amendment would have given states the option to source intrastate sales and leases on an origin basis, without a single rate option for interstate sales. On another front, the contract between the Board and Certified Service Providers (CSPs) was approved. The Executive Committee may now enter into contract with two approved CSPs. The CSPs will be compensated by a percentage of taxes remitted on behalf of volunteer sellers. A “most-favored-nation” clause of the contract forces the CSPs to offer services to member states on the same conditions it offers to nonmember states. (Streamlined Sales Tax Implementing States and Governing Board Meetings, Indianapolis, April 17-19, 2006)

(10/01/2006)

Taxpayers who register to file sales/use tax returns under the Streamlined Sales Tax Project are granted full amnesty which includes forgiveness of all open sales and seller’s use tax, interest, and penalties for prior period sales/use tax liabilities by member states, but taxpayers are cautioned that the amnesty deadline varies by state. It is important to note that the amnesty does not apply to consumer’s use tax or any other taxes such as income, franchise, payroll, property or other excise taxes. The amnesty also does not cover any collected, but un-remitted taxes.

Amnesty is available in all states participating as full members or associate members of the Streamlined Sales and Use Tax Agreement (the “Agreement”). States will provide amnesty for uncollected or unpaid sales or use taxes to a seller who registers to pay or collect and remit taxes on sales made to purchasers in the state. The amnesty period, however, ends 12 months from the date the state becomes a full member of the Agreement.

As of October 1, 2005, there were 13 full member states: Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Oklahoma, South Dakota, and West Virginia. Therefore, the amnesty deadline for these states ended September 30, 2006. For associate member states, the amnesty period begins on the date the state becomes an associate member and ends 12 months after the date they become full members. Thus, the amnesty period for associate member states will vary in length of time; however it will be longer than 12 months as taxpayers can also obtain amnesty during the period they are classified as an associate member state. Associate member states are Arkansas, Ohio, Tennessee, Utah, and Wyoming. For further information on background and how to obtain amnesty through the registration process, go to: http://www.streamlinedsalestax.org/amnesty.html.

(09/01/2006)

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