The Arkansas Department of Finance and Administration’s Office of Hearings and Appeals (the Office) partially sustained a taxpayer’s refund claim denial. The taxpayer requested a refund on tax paid on certain purchases of certain tangible personal property and services, as detailed below.
Repair of concrete floor. The Office determined the taxpayer was incorrectly denied a refund claim on an invoice for a concrete floor repair service completed by a plumber. The Office found that the taxpayer’s concrete slab did not meet the state’s definition of flooring in GR-9.17(B)(3) and a repair service to the concrete slab by a plumbing contractor is not taxable.
Invoices for Repairs of Capacitor Banks. The Office determined that the taxpayer was incorrectly denied a refund claim on an invoice by an electrical contractor to replace a broken conduit affixed to the taxpayer’s building. The repair of the conduit was a nontaxable service considered a repair of a nonchemical, passive, or manually operated building component affixed to real estate (Ark. Code Ann. § 26-52-301(3)(B)(viii)(a) (Supp. 2017)). However, the electrical contractor was responsible for sales tax owed on materials used in the repair as required by GR-21.
Labor for Partial Replacement. The Office determined the taxpayer was correctly denied a refund claim on charges related to labor to replace a component of a part in its manufacturing process. The replacement of a component of a certain part did not qualify for the manufacturing and equipment exemption, as it was considered a non-substantial replacement. The partial replacement did not satisfy the requirement that “substantially all of the machinery and equipment required to perform an essential function is physically replaced with new machinery.” (Ark. Code Ann. § 26-52-402(a)(2)(B)(i) (Supp. 2017))
Steam Flow Meter Purchase. The Office determined the taxpayer was correctly denied a refund claim related to the purchase of a steam flow meter. The taxpayer was unable to prove that the steam flow meter qualified for the manufacturing and equipment exemption. The taxpayer could not demonstrate that the steam flow meter (i) directly controlled, measured, or recorded an aspect of the manufacturing process itself; or (ii) directly controlled, measured, or recorded the operation of other items of exempt manufacturing machinery and equipment used in the taxpayer’s manufacturing process.
(Docket No. 19-148, Arkansas Department of Finance and Administration Office of Hearings & Appeals, March 5, 2019)