STATE OF ARKANSAS Department

of Finance and Administration December

7, 2015 Federal Aviation Administration Attn: Director of Airport Compliance and Management Analysis 800 Independence Avenue SW Washington, DC 20591 Dear Sir or Madam:

Assistant Commissioner

of Revenue POLICY AND LEGAL 1816 West Seventh Street, Suite 2440 Post Office Box 1272 Little Rock, Arkansas 72203-1272 Phone: (50 I) 682-7000 Fax: (501) 683-1161 http://www.dfa.arkansas.gov The Arkansas Department
of Finance and Administration
(DF A) is the primary tax collection agency for the State of Arkansas and is the agency responsible for collecting both state, city, and county sales taxes on aviation fueL DFA recognizes that the Federal Aviation Administration (FAA) has adopted policies and procedures addressing the requirement that state and local taxes on aviation fuel are considered airport revenue subject to the revenue-use requirement, except those taxes in effect December 30, 1987. DFA also understands that noncompliant states are expected to submit an action plan to the FAA outlining the strategic plan to come into compliance with these revenue use requirements. Each state, city, and county sales and use tax levied on aviation fuel by the State of Arkansas
or one of its political subdivisions has been reviewed
to ensure compliance with federal law. It is the conclusion
of DFA that all state and local sales and use taxes administered byDFA arein full compliance with federal requirements. This conclusion

is based upon the fact that sales and use taxes levied upon aviation fuel under any city or county tax enacted after December 30, 1987 are currently deposited for use by the ap- propriate local airport authority. With regard to those city and county sales and use taxes levied prior to December 30, 1987 and still in effect, it is DF As conclusion that each of those taxes qualifies for the grandfather provisions

as not subject to the airport revenue use requirement. Attached
to this letter is a packet of information
for each local sales and use tax enacted prior to December 30, 1987 by a city or county located within the State of Arkansas.
A copy of each ordinance and any subsequent amendments
are attached for each tax levy. A co- versheet
is also included providing the enactment date of each ordinance, the ordinance number, the appli- cable tax rate, the purpose or use of each tax, the applicability
of the tax, administrative costs, the applica- ble credits and exemptions, and
a list of any subsequent amendments. Finally, each coversheet provides

a brief explanation regarding the reason DF A concludes that the tax qualifies for the grandfather provision. With regard to state sales and use taxes, DF A submits that the state gross receipts,
or sales, tax is being applied in a manner compliant with FAA Policy
& Procedures Concerning the Use of Airport Revenue; Proceeds from Taxes on Aviation Fuel (79 Fed. Reg. 6628)(Amendment) adopted on November

7, 2014. Specifically, 4.5% of the 6.5% state tax on aviation fuel is designated

as special revenue
to the Arkansas Department
of Aeronautics

as a "local airport system" under 49 U.S.C.

§ 47133(a)
in so far as a state taxFederal Aviation Administration Page
2 of3 December

7, 2015 is being used for state aeronautics and navigation purposes.DF A further supplements
the funding of the Arkansas Department
of Aeronautics with designated special revenueof the 4.5% of the 6.5% State Gross Receipts tax onaircraft and other aeronautical services. The Arkansas Gross Receipts Tax was originally enacted in 1941. See Ark. Acts 1941, No. 368. The Gross Receipts tax applies to all sales of tangible personal property and to specified services. See Ark. Code Ann.

§ 26-52-301 and -302. The State of Arkansas provides for specific reporting criteria that dis- tinguishes the taxes remitted
to DF A onaviation fuel transactions from the taxes remitted onother taxable transactions

to allow for the tax revenueof the former
to be appropriated

ordisbursed
in compliance with FAA Policy
& Procedures Concerning the Use of Airport Revenue; Proceeds from Taxes onAviation Fuel (79 Fed. Reg. 6628)(Amendment). The state gross receipts tax onaviation fuel, aircraft, aviation services, aircraft parts and accessories, and other gross receipts taxes remitted by aircraft dealers, airports, and flying fields is classified
as special revenuefor the Arkansas Department
of Aeronautics. See, e.g.,Ark. Code Ann.

§ 19-6-402; and§ 27- 115-11 0( constitutional
tax levies and certain special revenue gross receipts taxes such aseducational adequacyarenot designated

as special revenuefor the Department
of Aeronautics)

.Specifically, Ark. Code Ann.

§ 21-115-110(!)(6) desigoates
all general sales tax revenuederived from the sale of aviation fuel, aircraft, aviation services, aircraft parts and accessories, and other gross receipts taxes remitted by aircraft dealers, airports, and flying fields to be special revenue,that is revenuethat may only be used for the stat- utorily defined purposes.This special revenue
is deposited
in the Arkansas Department
of Aeronautics Fund created for the useof the Arkansas Department
of Aeronautics, after anadministrative deduction for State Central Services
to offset collection costs pursuant
to Ark. Code Ann.

§ 19-5-203. Ark. Code Ann. § 19-6-402. Both the Arkansas Department
of Aeronautics,

in 1941, and the Departmeot
of Aeronautics Fund, in 1973, demonstrate specific funding priorities for Arkansas aeronautics that predate the FAA Policy& Procedures Concerning the Use of Airport Revenue; Proceeds from Taxes onAviation Fuel (79 Fed. Reg. 6628)(Amendment). The Arkansas Department
of Aeronautics

is tasked with the development and maintenance
of the State aviation program
in Ark. Code Ann.

§ 27-115-101 through -110. This expresslyiocludes

the "con- struct[ion] and improv[ ement] of airports, civil airways, and other air navigation facilities ...." Ark. Code Ann.

§ 27-115-11

0( d). The current level of funding for the Arkansas Department
of Aeronautics exceeds the minimum standards setin FAA Policy
& Procedures Concerning the Use of Airport Revenue; Pro- ceeds from Taxes onAviation Fuel (79 Fed. Reg. 6628)(Amendment) because the State of Arkansas designates additional tax revenuefrom aeronautic-related transactions

to the Arkansas Department
of Aero- nautics. The specific pledge of state gross receipts tax revenueonthe sale of aviation fuel to the Arkansas Depart- ment of Aeronautics meets the requirements ofF AA Policy
& Procedures Concerning the Use of Airport Revenue; Proceeds from Taxes onAviation Fuel (79 Fed. Reg. 6628)(Amendmeot)

and remedies anyde- ficiency
at the State level by appropriating additional gross receipts tax revenueof other aeronautic-related transactions

to the Arkansas Department
of Aeronautics exceeding the FAA minimum standards.Federal Aviation Administration Page
3of3 December

7,2015 DFAis available

to respond
to any questions you might have regarding the contentsof this letter orthe accompanying materials provided. Any questions maybe submitted

tomeatthe telephone
oraddress shown above. Sincerely, JohnH. Theis Assistant Commissioner

of Revenue Policy and Legal Cc: Paul Gehring, Chief Counsel Revenue Legal Counsel Tom Atchley, Administrator Excise Tax Administration Roberta Ovennan, Manager Sales and UseTaxSTATE OF ARKANSAS Department

of Finance and Administration December

7, 2015 Federal Aviation Administration Attn: Director of Airport Compliance and Management Analysis 800 Independence Avenue SW Washington, DC 20591 Dear Sir orMadam:

Assistant Commissioner

of Revenue POLICY AND LEGAL 1816 West Seventh Street, Suite 2440 Post Office Box 1272 Little Rock, Arkansas 72203RI272 Phone: (50!) 682-7000 Fax: (501) 683-1161 http://www.dfa.arkansas.gov The Arkansas Department

of Finance and Administration (DFA)
is the primary tax collection agencyfor the State of Arkansas and is the agency responsible for collecting both state, city, and county sales taxes onaviation fueL DFA recognizes that the Federal Aviation Administration (FAA) has adopted policies and procedures addressing the requirement that state and local taxes onaviation fuel areconsidered airport revenue subject to the revenue-use requirement, except those taxes in effect December 30, 1987. DFA also understands that noncompliant states are expected
to submit anaction plan to the FAA outlining the strategic plan to comeinto compliance with these revenueuse requirements. Each state, city, and county sales and usetax levied onaviation fuel by the State of Arkansas
oroneof its political subdivisions has been reviewed
to ensure compliance with federal law. It is the conclusion
of DF A that all state and local sales and usetaxes administered
by DF A arein full compliance with federal requirements. This conclusion

is based uponthe fact that sales and usetaxes levied uponaviation fuel under any city or county tax enacted after December 30, 1987 are currently deposited for use by the **ap~** propriate local airport authority. With regard to those city and county sales and usetaxes levied prior to December 30, 1987 and still in effect, it is DF As conclusion that each of those taxes qualifies for the grandfather provisions

asnot subject to the airport revenueuse requirement. Attached

to this letter is a packet of information
for each local sales and usetax enacted prior to December 30, 1987 by a city or county located within the State of Arkansas.
A copyof each ordinance and any subsequent amendments
areattached for each tax levy. A co· versheet
is also included providing the enactment date of each ordinance, the ordinance number, the appli- cable tax rate, the purposeoruseof each tax, the applicability

of the tax, administrative costs, the **applica~** ble credits and exemptions, and alist of any subsequent amendments. Finally, each coversheet provides

a brief explanation regarding the reasonDFA concludes that the tax qualifies for the grandfather provision. With regard to state sales and use taxes, DF A submits that the state gross receipts, or sales, tax is being applied in amanner compliant with FAA Policy
& Procedures Concerning the Use of Airport Revenue; Proceeds from Taxes onAviation Fuel (79 Fed. Reg. 6628)(Amendment) adopted onNovember

7, 2014. Specifically, 4.5% of the 6.5% state tax onaviation fuel is designated

as special revenue
to the Arkansas Department
of Aeronautics

asa'•local airport system" under 49 U.S.C.

§ 47133(a)
in sofar asastate taxFederal Aviation Administration Pagel of3 December

7,2015 is being used for stateaeronautics and navigation purposes.DFA further supplements the funding ofthe Arkansas Department
of Aeronautics with designated special revenueofthe 4.5% ofthe 6.5% State Gross Receipts taxonaircraft and other aeronautical services. The Arkansas Gross Receipts Taxwas originally enacted in 1941. SeeArk. Acts 1941, No.368. The Gross Receipts tax applies
toall sales of tangible personal propertyand to specified services. SeeArk. Code Ann.§ 26-52-301 and -302. The State of Arkansas provides for specific reporting criteria that dis- tinguishes the taxesremitted
toDFAonaviation fuel transactions from the taxesremitted onother taxable transactions

toallow for the tax revenueofthe former tobe appropriated

ordisbursed
in compliance with FAA Policy
& Procedures Concerning the Useof Airport Revenue; Proceeds from TaxesonAviation Fuel (79 Fed. Reg. 6628)(Amendment). The state gross receipts taxonaviation fuel, aircraft, aviation services, aircraft partsand accessories, and other gross receipts taxesremitted by aircraft dealers, airports, and flying fields is classified
as special revenuefor the Arkansas Department
of Aeronautics. See, e.g.,Ark. Code Ann.§ 19-6-402; and§ 27- 115-11 0( constitutional
taxlevies and certain special revenue gross receipts taxessuch aseducational adequacyarenot designated

as special revenuefor the Department
of Aeronautics)

.Specifically, Ark. Code Ann.
§ 21-115-11 O(f)(6) designates
all general sales taxrevenuederived from the sale of aviation fuel, aircraft, aviation services, aircraft partsand accessories, and other gross receipts taxesremitted by aircraft dealers, airports, and flying fields tobe special revenue,that is revenuethat may only be used for the stat- utorily defined purposes.This special revenue
is deposited
inthe Arkansas Department
of Aeronautics Fund created for the useofthe Arkansas Department
of Aeronautics, after anadministrative deduction for State Central Services
tooffset collection costs pursuant
toArk. Code Ann.§ 19-5-203. Ark. Code Ann. § 19-6-402. Both the Arkansas Department
of Aeronautics,

in 1941, and the Department
of Aeronautics Fund, in 1973, demonstrate specific funding priorities for Arkansas aeronautics that predate the FAA Policy& Procedures Concerning the Useof Airport Revenue; Proceeds from TaxesonAviation Fuel (79 Fed. Reg. 6628)(Amendment). The Arkansas Department
of Aeronautics

is tasked with the development and maintenance
ofthe State aviation program
in Ark. Code Ann.
§ 27-115-101 through -II0.This expressly includes the "con- struct[ion] and improv[ement]

of airports, civil airways, and other air navigation facilities ...."Ark. Code Ann.
§ 27-115-IIO(d). The currentlevel of funding for the Arkansas Department
of Aeronautics exceeds the minimum standards setinFAA Policy
& Procedures Concerning the Useof Airport Revenue; Pro- ceeds from TaxesonAviation Fuel (79 Fed. Reg. 6628)(Amendment) because the State of Arkansas des- ignates additional taxrevenuefrom aeronautic-related transactions

tothe Arkansas Department
of Aero- nautics. The specific pledge of state gross receipts taxrevenueonthe sale of aviation fuel tothe Arkansas Depart- mentof Aeronautics meetsthe requirements

of FAA Policy
& Procedures Concerning the Useof Airport Revenue; Proceeds from TaxesonAviation Fuel (79 Fed. Reg. 6628)(Amendment)

and remedies anyde- ficiency
atthe State level by appropriating additional gross receipts taxrevenueof other aeronautic-related transactions

tothe Arkansas Department
of Aeronautics exceeding the FAA minimwn standards.FederalAviationAdministration Page3of3 December

7,2015 DFAisavailable

torespond
toanyquestions youmighthave regardingthecontentsofthisletterorthe accompanyingmaterials provided. Any questions maybesubmitted
tomeatthe telephone
oraddress shownabove. Sincerely,;f), **~** JolmH.Theis AssistantCommissioner

ofRevenue Policyand Legal Cc:Paul Gehring,ChiefCounsel Revenue LegalCounsel Tom Atchley,Administrator ExciseTaxAdministration RobertaOverman, Manager SalesandUseTax