An Arkansas taxpayer protested the denials of sales tax refund claims resulting from audits. The exemption regulations require machinery, equipment, or chemicals to be installed and utilized to prevent or reduce air or water pollution in manufacturing. An Arkansas administrative law judge (ALJ) ruled that the denials of the purchases that this taxpayer claimed exemptions for should all but one be sustained. At issue was the qualification of the equipment being claimed as exempt which consisted of purchases of tangible personal property and services to repair machinery. Absent proof of entitlement to exemption, the state levies tax on the sale of tangible personal property and upon the sales of services to initially install, alter, add, clean, refinish, replace, and repair machinery of all kinds. One category of the refund that was denied related to chemicals consumed or used by manufacturing to prevent or reduce air or water pollution or contamination. There was a lack of evidence to prove that the chemical claimed to reduce pollution acted directly on the water or air. To be exempt, the chemical must act directly on the air or water to remove or alter impurity in the air or water. Otherwise, supplies and chemicals used by pollution control machinery and equipment are taxable. The sole category of refund allowed as confirmed by the ALJ was for items used indirectly in the pollution control process because they were replacement parts for equipment specifically required by permit to reduce air pollution and were specifically listed required items in a letter from ADEQ (Arkansas Department of Environmental Quality). Unless the Taxpayer requests in writing within twenty days of the mailing of this decision, this Administrative Decision shall be effective and become the action of the agency. (Arkansas Department of Finance and Administration, Ark. Code Ann. § 26-18-406)