Arkansas Code of 1987 (2023) › Title 26 - TAXATION (§§ 26-1-101 — 26-82-119) › Subtitle 5 - STATE TAXES (§§ 26-50-101 — 26-65-108) › Chapter 53 - COMPENSATING OR USE TAXES (§§ 26-53-101 — 26-53-303) › Subchapter 1 - ARKANSAS COMPENSATING TAX ACT OF 1949 (§§ 26-53-101 — 26-53-150) › Section 26-53-149 - Partial replacement and repair of certain machinery and equipment - Definitions

(a)
The taxes levied under §§
26-53-106
and
26-53-107
on the privilege of storing, using, distributing, or consuming the following within this state are subject to a refund or exemption as provided in this section:
(1)
Machinery and equipment purchased to modify, replace, repair, or maintain, either in whole or in part, existing machinery or equipment used directly in producing, manufacturing, fabricating, assembling, processing, finishing, or packaging articles of commerce at a manufacturing or processing plant or facility in this state;
(2)
Service relating to the initial installation, alteration, addition, cleaning, refinishing, replacement, or repair of machinery or equipment described in subdivision (a)(1) of this section;
(3)
Machinery and equipment purchased to modify, replace, or repair, either in whole or in part, existing molds and dies used directly in producing, manufacturing, fabricating, assembling, processing, finishing, or packaging articles of commerce at a manufacturing or processing plant or facility in this state; and
(4)
(A)
Except as provided in subdivision (a)(4)(B) of this section, machinery and equipment purchased for use or possible use by a taxpayer for a purpose described in subdivisions (a)(1)-(3) of this section and placed in inventory for later use by the taxpayer for a purpose described in subdivisions (a)(1)-(3) of this section.
(B)
(i)
As used in this subdivision (a)(4)(B), "withdrawal from inventory" means the withdrawal or use of machinery or equipment held under subdivision (a)(4)(A) of this section by a taxpayer for a purpose that does not qualify for an exemption under this section or any other applicable exemption at the time of the withdrawal from inventory.
(ii)
A withdrawal from inventory is not eligible for the exemption provided under this section.
(iii)
For purposes of calculating the compensating use tax under subdivision (a)(4)(B)(iv) of this section, the gross receipts or gross proceeds for a withdrawal from inventory is the purchase price of the machinery or equipment withdrawn.
(iv)
Tax is due on a withdrawal from inventory at the time the withdrawal from inventory occurs.
(b)
(1)
Beginning July 1, 2014, the taxes levied under §§
26-53-106
and
26-53-107
that are subject to a refund under this section are the taxes in excess of four and seven-eighths percent (4.875%).
(2)
The taxes levied under §§
26-53-106
and
26-53-107
that are subject to a refund under this section are the taxes in excess of the following rates:
(A)
Beginning July 1, 2018, three and seven-eighths percent (3.875%);
(B)
Beginning July 1, 2019, two and seven-eighths percent (2.875%);
(C)
Beginning July 1, 2020, one and seven-eighths percent (1.875%); and
(D)
Beginning July 1, 2021, seven-eighths percent (0.875%).
(3)
Beginning July 1, 2022, purchases qualifying for the tax refund under this section are exempt from the taxes levied under this chapter.
(c)
The excise tax of one-eighth of one percent (0.125%) levied in Arkansas Constitution, Amendment 75, the temporary excise tax of one-half percent (0.5%) levied in Arkansas Constitution, Amendment 91, and the excise tax of one-half percent (0.5%) levied in Arkansas Constitution, Amendment 101, are not subject to refund under this section.
(d)
As used in this section:
(1)
"Manufacturing" or "processing" means the same as defined under §
26-53-114(b)
and includes activities described in subsection (a) of this section, both independently and collectively; and
(2)
"Used directly" means the same as defined under §
26-53-114(c)
.
(e)
All existing excise tax exemptions, including without limitation exemptions under §§
26-52-402
and
26-53-114
, remain in full force and effect and are not limited by this section.
(f)
A taxpayer may claim the benefit of the tax refund under this section only by using one (1) of the following methods:
(1)
(A)
Both:
(i)
Obtaining a direct pay or a limited direct pay sales and use tax permit from the Department of Finance and Administration; and
(ii)
Self-refunding:
(a)
At the time the taxpayer files his or her original sales and use tax report; or
(b)
By later filing an amended sales or use tax report with the department.
(B)
The statutes of limitation stated in §
26-18-306
apply to claims made under this subdivision (f)(1).
(C)
Interest shall not accrue or be paid on a refund claimed under this subdivision (f)(1); or
(2)
(A)
Beginning July 1, 2018, for a taxpayer that does not hold a direct pay or limited direct pay permit, holds an active Arkansas sales and use tax permit, and files sales and use tax reports with the department, filing a claim for the credit or rebate with the department.
(B)
(i)
The credit or rebate authorized under this subdivision (f)(2) shall be obtained only by offsetting the amount of the claimed credit or rebate against the state tax to be remitted with the taxpayer's sales and use tax reports.
(ii)
If the total amount of the credit or rebate authorized under this subdivision (f)(2) is greater than the amount of the state tax to be remitted with the taxpayer's sales and use tax reports, the taxpayer is entitled to a refund of the difference between the amount of the tax owed and the amount of the credit or rebate authorized under this subdivision (f)(2).
(C)
A taxpayer claiming a credit or rebate under this subdivision (f)(2) shall electronically file all sales and use tax reports.
(D)
A claim for credit or rebate under this subdivision (f)(2) shall not be paid for a claim filed more than one (1) year following the date of the qualifying purchase or more than one (1) year following the date of payment, whichever is later.
(E)
Interest shall not accrue or be paid on an amount subject to a claim for a credit or rebate under this subdivision (f)(2).
(g)
A claim for a credit or rebate shall not be paid under subdivision (f)(2) of this section for a purchase made before July 1, 2018.
(h)
A taxpayer shall not claim the benefit of the refund under this section by filing a verified claim for refund with the department.
(i)
The following provisions of the Arkansas Tax Procedure Act, §
26-18-101
et seq., apply to claims for a refund under this section:
(1)
The time limitations that apply to claims for a refund of an overpayment of state tax; and
(2)
The procedures that apply to the disallowance or proposed disallowance of claims for a refund.
Amended by Act 2023, No. 646,§ 3, eff. 7/1/2023.
Amended by Act 2023, No. 130,§ 4, eff. 2/24/2023.
Amended by Act 2019, No. 772,§ 2, eff. 10/1/2019.
Amended by Act 2017, No. 465,§ 7, eff. 3/13/2017.
Amended by Act 2017, No. 465,§ 6, eff. 3/13/2017.
Amended by Act 2015, No. 1107,§ 3, eff. 4/6/2015.
Added by Act 2013, No. 1404,§ 2, eff. 7/1/2014.