Arkansas Reduces Tax Rate on Utilities Sold to Manufacturers and Electric Power Generators

Arkansas has reduced the sales and use tax rates on natural gas and electricity sold to manufacturers and to specified electric power generators. Effective July 1, 2011, the sales and use tax rate on natural gas and electricity sold to a manufacturer for use directly in the manufacturing process is reduced from 3.125% to 2.625%. An additional 0.125% constitutional rate must be added to the preceding statutory rate in order to obtain the total tax rate. To claim the reduced rate, manufacturers can file a refund request or amended return. When the tax savings received by taxpayers as a result of the reduced rate reach $27 million during a fiscal year, the refund and amended return process will be discontinued. Refund requests and amended returns will be processed in the order they are received. Taxpayers that didn’t receive a refund in a prior year will be given priority to receive a refund in the subsequent year. The statute of limitations for refunds and amended returns will be extended one year for such taxpayers to allow for the refund payment. The sales and use tax rate on natural gas and electricity sold to an electric power generator that operates a new or existing facility using combined-cycle gas turbine technology is reduced to the following rates: 5.125% beginning January 1, 2012, 4.125% beginning January 1, 2013, and 2.625% beginning January 1, 2014. Note that manufacturers and electric power generators must meet specified classifications of the North American Industry Classification System as in effect on January 1, 2011 to qualify for the reduced rates. (Act 754 (S.B. 275), Laws 2011, effective as noted)

Posted on May 21, 2012