The Supreme Court of Arkansas (Court) ruled that a manufacturer of chicken and food products was not eligible for a refund of sales tax paid on rentals of pallets used to deliver its products since the transactions are not sales for resale.
The taxpayer argued that the pallets used for delivery are an integral part of the chicken that it sells, and therefore the pallet rentals are exempt as sales for resale. The Arkansas Department of Finance and Administration and a lower court had previously rejected the taxpayer’s claim. The Court affirmed the lower court’s decision.
Quoting Arkansas tax law, the Court stated that to qualify for an exemption, the item must become an integral part of the product. The taxpayer claimed that it sells and delivers pallets of chicken, and the pallets are therefore integral to the final packaged product that its customers receive.
The Court disagreed, stating that “…wooden pallets do not meet that standard. They never become part of the chicken. Instead, they are a means of delivery.” The Court went on to state that “…wooden pallets are not necessary to complete the chicken. They are merely a convenient way to market and deliver it” and “…it is possible to sell chicken without wooden pallets. Indeed, the end consumer buys chicken, not chicken and a pallet.”
As a result, the Court affirmed the lower court’s decision and denied the taxpayer’s refund claim. (Tyson Chicken Inc. v. Department of Finance and Administration, Supreme Court of Arkansas, No. CV-25-16, June 4, 2026)