A reagent is also a substance used to convert one substance into another by means of the reaction that it causes. To be a reagent for purposes of this exemption, a substance must be primarily used as a reagent. The gross receipts or gross proceeds derived from the sale of catalysts, chemicals, reagents and solutions which are consumed or used directly in manufacturing or processing articles of commerce at manufacturing or processing plants or facilities in the State of Arkansas are exempt from gross receipts tax. A substance may be in the form of liquid, solid or gas. A substance is consumed or used in manufacturing or processing an article of commerce if it is used to produce a chemical or physical effect during the manufacturing process and the chemical or physical effect is a direct and necessary step in the production of the article.
Substances used in testing the quality of the finished article of commerce are exempt.
Gas, diesel, oil, natural gas, or other materials used to power machinery and equipment are not exempt. Substances used before the manufacturing process begins or after the manufacturing process concludes are not exempt. Water used during the manufacturing process is not exempt. In order to be exempt, substances must be used by a manufacturer during a manufacturing process. A business which processes photographic film or negatives, and prints photographs, plates, slides or other similar items from the film or negatives is not a manufacturer.